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Coca-Cola Enterprises Beats on Q2 Earnings on Volume Growth

Zacks Equity Research

Coca-Cola Enterprises Inc(CCE) reported second-quarter 2014 adjusted earnings of 90 cents per share, beating the Zacks Consensus Estimate of 88 cents by 2.3% and the year-ago earnings of 77 cents by 16.9% driven by volume growth. Currency also favorably impacted second quarter earnings by 6 cents.


Coca-Cola Enterprises Inc - Earnings Surprise | FindTheBest


Quarter Details

During the quarter, net sales grew 8.0% year over year to $2.333 billion but fell short of the Zacks Consensus Estimate of $2.346 billion by a slight margin. Excluding currency translations, revenues increased 2.5% driven by improvement in volumes.

Volumes grew 3.5% in the second quarter as against a decline of 1.5% in the preceding quarter. Volumes grew in Great Britain and continental Europe (including Norway and Sweden) by 2% and 4%, respectively, despite ongoing macroeconomic headwinds and competitive pressure in Great Britain.

Sparkling beverages grew 3.5% whereas still beverage grew 2%. Growth in the still beverage portfolio was led by water, Oasis, Capri Sun, and Nestea. In Coca-Cola trademark brands, Coca-Cola Zero recorded volume growth of 14%, while Coke grew 4%. The company’s energy brands grew 3% in the reported quarter.

Net pricing per case was flat, while cost of sales per case declined 1% in the quarter. Total cost of sales was $1.487 billion in the reported quarter, up 6% from the year-ago quarter.

Adjusted operating income grew 8.5% to $341 million owing to a 6% rise in operating expenses. On a currency neutral basis, adjusted operating income grew 2%.

Share Repurchase

Through the second quarter, the company repurchased almost $600 million shares. In Dec 2013, the board of Coca-Cola Enterprises, the western European bottler of The Coca-Cola Company (KO), authorized a new $1 billion share repurchase program, the fourth buyback program since the company’s inception in 2010. The company expects to buy back $800 million worth of shares by the end of 2014.

2014 Outlook Maintained

The company reiterated its 2014 guidance. In 2014, the company continues to expect adjusted earnings to increase approximately 10% in constant currency terms. In addition, currency is expected to benefit 2014 earnings per share by over 5%.

While adjusted constant currency net sales are expected to grow in the low single-digit range, operating income is expected to grow in the mid single-digit range.

Coca-Cola Enterprises continues to expect free cash flow for full-year 2014 to be $650 million, while it expects capital expenditures to be approximately $350 million. The company expects the weighted average cost of debt to be around 3%. Effective tax rate is expected in a range of 26% to 28%.

Coca-Cola Enterprises carries a Zacks Rank #3 (Hold). Better-ranked beverage stocks worth considering include The WhiteWave Foods Company (WWAV) and Pepsico Inc. (PEP), both holding a Zacks Rank #2 (Buy).

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