Coca-Cola Enterprises (CCE) Tops First Quarter Profits; Sales delay

Coca-Cola Enterprises Inc. CCE reported mixed results for the first quarter of 2016, with earnings beating the Zacks Consensus Estimate and revenues remaining flat.

Adjusted earnings per share of 41 cents are 2.5% ahead of the Zacks Consensus Estimate of 40 cents. However, profits declined 2.4% year-over-year due to weak consumer demand trends, higher operating costs and one less day of sales in the reported quarter. Additionally, currency had a negative impact on adjusted earnings by 2 cents. These unfavorable factors offset the benefits resulting from the decline in selling costs.

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

Coca-Cola Enterprises Inc. – Earnings Surprise | FindTheBest

Revenue

For the quarter, net sales declined 7% year-over-year to $1.517 billion and missed the Zacks Consensus Estimate of $1.526 billion by 0.6%. At a neutral exchange rate, net sales decreased by 3.5%. The decline was due to lower volumes resulting from temporary UK supply chain disruptions and one fewer day of sales in the quarter.

On a comparable and currency neutral basis, cost of sales per pack decreased by 2.5%. Adjusted operating income fell 2% to $162 million. On a neutral currency basis, adjusted operating income increased 1.5%.

Quantities and prices updated

Volumes decreased 4% year over year. The downside was the continued challenging macroeconomic trends in the territories and temporary disruptions to the UK supply chain related to the implementation of new programs and processes.

Volumes fell by 5% in the UK and 3.5% in continental Europe.

While still volume increased 1% thanks to growth in UK and Chaudfontaine, carbonated volume declined 5%, reflecting a 6.5% decline in Coca-Cola’s commodity brands and mid-single-digit energy growth.

On a like-for-like and currency neutral basis, the net price per unit was unchanged from a 0.5% decline in the prior quarter.

The forecast for 2016 was maintained

On a comparable and currency neutral basis, 2016 net sales are expected to increase slightly. The company expects free cash flow to be between $500 million and $550 million for the full year. The company does not expect any share repurchase in 2016.

Coca-Cola Enterprises is 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 scheduled to close at the end of the second quarter of 2016.

Zacks Rank and Key Picks

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

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

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