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The beverage market continues to expand as ready-to-drink teas, flavored waters, and sports drinks take center stage over the colas of the past. Cott Corporation (COT - Snapshot Report) is cashing in on the change in consumer preferences. Shares are still a value, trading at just 9.7x forward estimates.

You might not have heard of Cott but you would know its brands. It's one of the largest retailer brand soft drink provider in the world (basically, if you buy a grocery store brand cola, for example). But it also has its own line of products including Cott, RC, Ben Shaws, Stars & Stripes, Vintage and Vess.

Its main markets are the United States, Canada, the United Kingdom and Mexico but it supplies 200 retailer brands in over 50 countries.

Cott Beat By 9.5% in the Third Quarter

On Nov 4, Cott reported its third quarter results and surprised on the Zacks Consensus by 2 cents per share. Earnings per share were 23 cents compared to the consensus of 21 cents.

It was the 7th straight earnings surprise, an impressive string considering the global economic conditions during that time.

Revenue rose 2% if you exclude the revenue from the Cliffstar acquisition which closed in the summer of 2010. Including Cliffstar, revenue rose 21% to $491 million, with $80 million from Cliffstar.

Higher revenue was boosted by higher volume in North America, Mexico and Royal Crown International ("RCI") and a positive price mix in the U.K. as the energy and sports drink market continues to grow. Mexico revenue grew 20% to $12 million.

Filled beverage case volume rose 14%, but was only 3% excluding Cliffstar. This was boosted by growth in North America, Mexico and RCI. North America grew 4% in the quarter.

Zacks Consensus Estimates Rise

The 2010 Zacks Consensus Estimate has risen 2 cents to 75 cents over the last 60 days.

Analysts are bullish about earnings growth in 2011. They see growth of 20.1% to 90 cents per share, which is up from 87 cents expected just 2 months ago.

Cott is scheduled to report fourth quarter results on Feb 23.

Valuations Still Attractive

Despite a nearly 2-year high in the stock, there is still value in the shares. In addition to a P/E under 10, it also has a price-to-book ratio of just 1.6.

The company's price-to-sales ratio is also attractive at only 0.5. Dr. Pepper Snapple (DPS) and Hansen Natural (HANS) both trade with higher ratios of 1.5 and 3.6, respectively.

Cott also has an excellent 1-year return on equity (ROE) of 15.6%.

Cott is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

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