Tags: Coca-Cola | Enterprises | costs | CCE

Coca-Cola Enterprises Handles Costs, Wall Street

By    |   Friday, 17 February 2012 07:52 AM

Coca-Cola Enterprises (CCE), the soft-drink giant's European bottler, is doing all the right things in a tough environment by handling its costs well, passing the right amount of cost pressures on to customers and wooing Wall Street banks in the process.

The numbers are on the rise, thanks to sound pricing and demand for energy-drink bands. Revenue during the fourth quarter of 2011 rose 6 percent on year to $1.89 billion, while net earnings during the fourth quarter rose 17 percent on year to $113 million.

While costs are rising, customers are willing to pay more for Coca-Cola products.

In the fourth quarter of 2011, volume climbed 3 percent, net pricing per case grew 2.5 percent, and the cost of goods sold per case was up 2.5 percent.

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For the full year in 2011, revenue rose 23 percent to $8.28 billion while income rose 20 percent to $749 million. "2011 marks the sixth consecutive year of volume and profit growth in our legacy territories," says company Chairman and CEO John F. Brock.

For 2012, sales should grow just shy of 10 percent, boosted in part by the Summer Olympics taking place in London, he predicts.

Time to buy?

Wall Street firms like the company, telling clients the stock is a buy right now. While CCE may not be a slick, hot-growth stock, it is steady, pays dividends and enjoys unparalleled brand recognition, not bad attributes when looking to inject some stability into a portfolio, they argue.

In February 2012, UBS reiterated a buy rating on the company, while Goldman Sachs initiated coverage at buy. In December, Argus upgraded to buy from hold.

Keep an eye out for dealings in Germany, where the company holds the rights to purchase a Coca-Cola bottler from the global headquarters in Atlanta.

Price could be a factor, since the company would have to pay fair value, but the deal would give CCE great control over a huge market, pumping cash into its coffers.

"While a fair value has yet to be determined, it is expected to be significant. As a point of reference, the population of Germany is approximately 82 million, and CCE's territory covers roughly 165 million consumers," analysts at Fitch Ratings write.

For now, CCE is looking to create more value for its shareholders. CCE recently announced it was upping its dividend payments to 16 cents, a 23 percent increase. It is the fifth consecutive annual increase.

The move to hike dividends comes in wake of a $1 billion share repurchase plan that wrapped up in December 2011. A similar buyback is underway now.

Coca-Cola Enterprises release first quarter earnings on May 10.

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