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Was Coca-Cola HBC AG's (LON:CCH) Earnings Decline Part Of A Broader Industry Downturn?

Simply Wall St

For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Coca-Cola HBC AG (LSE:CCH) useful as an attempt to give more color around how Coca-Cola HBC is currently performing.

View our latest analysis for Coca-Cola HBC

Was CCH's weak performance lately a part of a long-term decline?

CCH's trailing twelve-month earnings (from 28 June 2019) of €426m has declined by -5.7% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 11%, indicating the rate at which CCH is growing has slowed down. What could be happening here? Let's examine what's going on with margins and if the whole industry is facing the same headwind.

LSE:CCH Income Statement, October 19th 2019

In terms of returns from investment, Coca-Cola HBC has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. Furthermore, its return on assets (ROA) of 5.6% is below the GB Beverage industry of 7.2%, indicating Coca-Cola HBC's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Coca-Cola HBC’s debt level, has increased over the past 3 years from 12% to 15%.

What does this mean?

Coca-Cola HBC's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I recommend you continue to research Coca-Cola HBC to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for CCH’s future growth? Take a look at our free research report of analyst consensus for CCH’s outlook.
  2. Financial Health: Are CCH’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 28 June 2019. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.