Coca-Cola Enterprises Inc. (CCE) is set to report second quarter 2014 results on Jul 24. Last quarter, the company delivered a positive earnings surprise of 4.55%. Let's see how things are shaping up for this announcement.
We note that Coca-Cola Enterprises’ earnings have outperformed the Zacks Consensus Estimate in the preceding five quarters, driven by cost savings initiatives and aggressive share buybacks.
Factors to Consider this Quarter
Coca-Cola Enterprises is an exclusive western European bottler of The Coca-Cola Company (KO) and is geographically focused on Western Europe. The company is thus exposed to the economic uncertainties of this region, including debt burdens of some of these countries and the challenging consumer spending environment. The company has been facing several operating and marketplace challenges, such as steep price competition in Great Britain and difficult beverage market conditions in France due to the increase in French excise tax. With ongoing macro pressure in Europe affecting sales, the company is forced to drive profit only through cost cutting and share repurchases.
In the first quarter, revenues fell short of the Zacks Consensus Estimate and grew only 1% year over year due to volumes declines, mainly in Great Britain. However, management expects it to pick up in the second quarter which marks the summer season.
In the second quarter, management expects adjusted operating income growth (including currency benefits) to be in line with the first quarter despite easier comparisons in the quarter.
Our proven model does not conclusively show that Coca-Cola Enterprises is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP:ESP for Coca-Cola Enterprises is 0.00% as both the Most Accurate Estimate and Zacks Consensus Estimate stand at 88 cents per share.
Zacks Rank #3 (Hold):Coca-Cola Enterprises’ Zacks Rank #3 when combined with an ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks in the consumer staples sector that have both a positive earnings ESP and a favorable Zacks Rank are:
Dr Pepper Snapple Group, Inc. (DPS), with Earnings ESP of +3.30% and a Zacks Rank #3.
Energizer Holdings, Inc. (ENR), with Earnings ESP of +1.29% and a Zacks Rank #3.