Coca-Cola Enterprises Inc.‘s (CCE) first-quarter 2011 earnings of 33 cents per share were in line with the Zacks Consensus Estimate. This also compares favorably with earnings of 27 cents in the year-ago quarter.
The results of the reported quarter include Norway and Sweden operations, but exclude the North American operation of the company. Results for the prior-year quarter, however, exclude Norway and Sweden operations but include the North American operation.
During the fourth quarter of 2010, Coca-Cola Enterprise divested its North American bottling business to the beverage giant The Coca-Cola Company (KO). Coca-Cola Enterprises is at present a newly registered company comprising its legacy European bottling operations and the bottling operations acquired from the Coca-Cola Company in Norway and Sweden.
Quarterly Details
During the first quarter, sales for Coca-Cola Enterprises increased 6.9% to $1,844.0 million on a comparable basis from $1,725.0 million in the year-ago period. The sales increase was attributable to a 5.0% increase in volume in all territories, followed by a surge of 1.5% in product prices, partially offset by rise of 1.5% in cost of goods sold. Revenue beat the Zacks Consensus Estimate of $1,828.0 million.
Gross profit for the quarter increased 6.6% to $661.0 million on a comparable basis from $620.0 million recorded in the year-ago quarter. Operating income also inched up 7.5% to $173.0 million from $161.0 million recorded in the year-ago quarter. Moreover, Coca-Cola Enterprises’ operating margin expanded by 10 basis points to 9.4% in the reported quarter from 9.3% in the prior-year quarter.
Balance Sheet, Cash Flow and Dividend
Coca-Cola Enterprises exited the quarter with cash and cash equivalents of $321.0 million. As of April 01, 2011, the company generated $8.0 million of cash from operations and deployed $83.0 million toward capital expenditure.
On April 26, the Board of Directors of Coca Cola Enterprises declared a quarterly dividend of 13 cents per share. The declared quarterly dividend is higher than 8.3% from the previous dividend payment of 12 cents a share. The dividend will be paid on June 23, 2011 to shareholders of record as of June 10, 2011.
During the reported quarter, Coca-Cola Enterprises repurchased $200.0 million of shares under its $1.0 billion share repurchase program, which started in the fourth quarter of fiscal 2010. Since the announcement of the share repurchase program, the company has bought back $400.0 million of shares and is expecting to complete the program by the end of fiscal 2011 or early 2012.
Fiscal 2011 Guidance
With the expectation of mid single-digit growth in revenue, management has now raised its full-year 2011 adjusted earnings expectation to the range of $2.10 to $2.15 from $1.95 to $2.00 per share. During fiscal 2011, the company expects to generate free cash flow of approximately $475.0 million to $500.0 million and deploy approximately $400.0 toward capital expenditure.
Coca-Cola Enterprises, which competes with Kraft Foods Inc. (KFT) and PepsiCo Inc. (PEP), currently has a Zacks #2 Rank, implying a short-term ‘Buy’, rating. We maintain a long-term ‘Neutral’ recommendation on the stock.
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