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Coca-Cola Enterprises (CCE) Tops Q1 Earnings; Sales Lag

Coca-Cola Enterprises Inc. CCE reported mixed first quarter 2016 results, wherein earnings beat the Zacks Consensus Estimate, while revenues missed the same.

Adjusted earnings of 41 cents per share beat the Zacks Consensus Estimate of 40 cents by 2.5%. However, earnings fell 2.4% year over year due to soft consumer demand trends, higher operating expenses and one fewer selling day during the reported quarter. Moreover, currency had a negative impact of 2 cents on adjusted earnings. These headwinds offset the benefits from a decline in cost of sales.

Adjusted earnings excluded restructuring costs, merger related costs and mark-to-market effects. Including these charges, earnings were 29 cents per share, down 27.5% year over year.

 

 

Revenues

During the quarter, net sales declined 7% year over year to $1.517 billion and fell short of the Zacks Consensus Estimate of $1.526 billion by 0.6%. On a currency neutral basis, net sales were down 3.5%. The decline was due to lower volumes resulting from temporary supply chain disruptions in Great Britain and one fewer selling day in the quarter.

On a comparable and currency-neutral basis, cost of sales per case was down 2.5%. Adjusted operating income tanked 2% to $162 million. On a currency neutral basis, adjusted operating income grew 1.5%.

Volume & Pricing Update

Volumes decreased 4% year over year. The downside was caused by continued difficult macroeconomic trends across the territories and temporary supply chain disruptions in Great Britain related to the implementation of new software programs and processes.

Volumes decreased 5% in Great Britain and were down 3.5% in continental Europe.

While volumes of still beverages grew 1% driven by growth in Great Britain and Chaudfontaine, sparkling beverages declined 5%, reflecting a 6.5% decline in Coca-Cola trademark brands and mid-single-digit growth in energy.

On a comparable and currency-neutral basis, net pricing per case was flat, as against a 0.5% dip in the previous quarter.

2016 Outlook Reiterated

On a comparable and currency-neutral basis, 2016 net sales are expected to grow slightly. The company expects full-year free cash flow in the range of $500 million to $550 million. The company does not expect to repurchase shares in 2016.

Coca-Cola Enterprises is due to merge with two of The Coca-Cola Company’s (KO) European bottlers — Coca-Cola Iberian Partners and Coca-Cola Erfrischungsgetränke AG — to form a Western European bottler — Coca-Cola European Partners. The transaction is expected to close by the end of second-quarter 2016.

Zacks Rank & Key Picks

Coca-Cola Enterprises carries a Zacks Rank #2 (Buy).

Other well-positioned beverage stocks worth considering include Primo Water Corporation PRMW, PepsiCo Inc. PEP and REEDS, Inc. REED. While Primo Water sports a Zacks Rank #1 (Strong Buy), both PepsiCo and REEDS carry a Zacks Rank #2 (Buy).

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COCA-COLA ENTRP (CCE): Free Stock Analysis Report
 
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