We issued an updated research report on Coca-Cola Enterprises, Inc. CCE on Apr 8, 2015.
Coca-Cola Enterprises’ fourth-quarter earnings and sales beat the respective Zacks Consensus Estimate. Adjusted earnings of 58 cents per share rose 7.4% year over year driven by lower cost of sales and other expenses. Sales increased 1.5% on a constant currency basis as improved volumes made up for the weaker pricing.
Coca-Cola Enterprises is The Coca-Cola Company’s KO strategic bottling partner in Western Europe. Coca-Cola Enterprises is thus, geographically focused in Western Europe and exposed to the economic uncertainties of the region.
The company has been facing a tough retail consumer and competitive environment in Great Britain. Though trends are improving, consumers in the country remain apprehensive of spending extravagantly.
Ongoing economic softness and operating challenges in Europe, evolving consumer landscape and an increasingly competitive environment hurt the company’s top line in 2014. Management expects these challenges to persist in 2015 which will limit revenue growth.
Moreover, management expects a benign commodity cost environment in 2015 versus the benefits realized in 2014. Cost of sales decreased 1% in the last year.
Also, currency translation is expected to be a significant headwind in 2015 as against being a tailwind in 2014.
With the Euro deteriorating versus the dollar, currency had a significant negative impact on Coca-Cola Enterprises’ earnings in the fourth quarter. The company expects Fx to be a much greater headwind to 2015 EPS than management’s previous expectations.
These external factors that supported results in 2014 are likely to disappear in 2015 making it a challenging year for Coca-Cola Enterprises.
It remains to be seen if Coca-Cola Enterprises’ innovation and marketing plans and better in-market execution can lend some support to the top line. The company’s marketing pipeline for 2015 includes sports sponsorships, like the Rugby World Cup in Great Britain, and special programs to expand the distribution of new products such as Coca-Cola Life and Finley in additional territories. The company also plans to expand its digital and social media presence through online marketing and mobile couponing.
Stocks to Consider
Coca-Cola Enterprises carries a Zacks Rank #4 (Sell). A couple of better-ranked beverage stocks are Monster Beverage Corporation MNST and Coca-Cola Amatil Limited CCLAY. While Monster sports a Zacks Rank #1 (Strong Buy), Coca-Cola Amatil has a Zacks Rank #2 (Buy).
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