How much Energy is left in this Drink?
Ashish is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
On Dec 18th, 2012 , Coca-Cola Enterprises (NYSE: CCE) came up with its expectations for Fiscal 2012 and 2013.The Company is mainly involved in production, distributution, and marketing nonalcoholic beverages. The stock was trading at unusually high volumes as and when the guidance was shared by the company showing the Confidence of the Investors on the Guidance made the Company.
Are we on line to achieve the 2012 targets?
The Company’s Fourth Quarter Earnings are expected to be declared in February but the guidance given by the Company shows that the Company is well aligned to achieve its 2012 targets even after adjusting the negative impact of the Currency Fluctuations which are approximated around 7.5%. The Company expects to achieve the higher end targets in terms of Diluted EPS at around $2.24 which shows that the Company’s Share purchase program is showing its impact on the EPS. Moreover the net sales and operating income are expected to grow in a low single digit range showing signs of stiff price Competition in the Industry. The Company has been able to manage its Cash Flows achieving the Higher Expected Cash flows of $500 with the lower end Capital Expenditure targets of $375 Million primarily due to continued focus on prudent capital management and the impact of the French excise tax increase.
What others are doing
PepsiCo, Inc.(NYSE: PEP) showed an estimated negative growth of 7.7% in the Fiscal 2012 but it estimates to grow at a CAGR of 4.25% over the next 5 years against the Industry Expectations of 12.99%. Pepsi is expecting to leverage on its growth plans with increased Dependence on the Asian markets like Japan & India.The launch of ‘Pepsi Special’ in Japan, a variant of Soda which helps to reduce fat levels in the blood shows that the Company wants to focus more on Health Conscious drinks as the Beverage Industry is facing huge criticism for the effects they have on Health.
Nestle (NASDAQOTH: NSRGY) the world’s leading nutrition, health and wellness company, has recently acquired Pfizer Nutrition for $11.85 billion. This acquisition would enhance its infant nutrition business in key segments and Geographies. As Pfizer has 85% of its sales in Emerging markets, this would give Nestle an appropriate ground for Future growth. The hovering double-digit growth of Nestle in emerging markets is in line with its expectations.
What to Expect in 2013?
Looking ahead to 2013 the Company expects to leverage itself through potential M&A or a probable Share Purchase as a means of increasing the Shareholders Value. Further Coca-Cola expects to end 2013 with a net debt to EBIDTA ratio of not less than 2.5 .This although increases the risk of the Shareholders but would also have a positive impact on the EPS which is reflected in the guidance given by the company. Company also expects 2013 free cash flow in a range of $450 million to $500 million after including a year-over-year increase in cash restructuring expenses of approximately $125 million. Capital expenditures are expected to be approximately $350 million. Weighted average cost of debt is expected to be approximately 3 percent. Net sales and operating income are expected to grow in a mid-single-digit range.
Advice
The company’s strong brand portfolio and solid cash position is worthy of appreciation. However, the anticipated margin weakness in 2013 is a matter of concern. Also, the currency headwinds and economic challenges in Europe may drag the company’s performance in the upcoming quarters; therefore Coca-Cola Enterprises would be a probable " Hold ".
ashishag has no positions in the stocks mentioned above. The Motley Fool owns shares of PepsiCo. Motley Fool newsletter services recommend PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!
