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Coca-Cola Enterprises Inc.’s (CCE - Analyst Report) third-quarter 2013 adjusted earnings of 82 cents per share beat the Zacks Consensus Estimate of 80 cents by 2.5% and the year-ago earnings of 71 cents by 15.5%. Favorable impact of 2 cents per share from currency translation, decline in operational expenses and lower share count led to year-over-year growth in earnings.

Revenues and Margins

During the quarter, on a currency-neutral basis, net sales grew about 2.5% year over year (up 5% on a reported basis) to $2.17 billion and came in line with the Zacks Consensus Estimate. Sales in the quarter were positively impacted by favorable weather conditions and continued marketing initiatives, especially the ‘Share a Coke’ campaign.

Coca-Cola Enterprises, one of the largest bottlers of The Coca Cola Co. (KO - Analyst Report), has been facing some challenges in the recent times. These include steep price competition in Great Britain and overall soft macro economic conditions. However, some of these challenges seemed to have taken a breather with volume in Great Britain growing 3% and 2.5% in continental Europe.

The company’s net pricing per case nudged up 0.5% whereas cost of sales per case increased 2.5% in the quarter. Overall, volumes (bottle and cans) grew 2.5% in the quarter. Sparkling drinks volume grew about 4% with beverages from Coca Cola increasing 5%. While Coca Cola Zero managed to post growth of as much as 23%, Coca Cola volumes improved a moderate 4%. Also, energy drinks volume grew 15% helped by Monster and Relentless brands.

Volume for Still beverages declined 5%, with water falling 6%. The decline came in stark contrast to 21% growth registered in the year-ago period.
Comparable operating income grew 4.5% owing to the continuing expense control initiatives.

Share Repurchase

Coca-Cola Enterprises began its third share repurchase program worth $1.5 billion in Jan 2013. The company expects to repurchase shares worth at least $1 billion during 2013.

Full Year Outlook

Coca-Cola Enterprises expects its adjusted earnings per share to remain in the upper half of the previously guided range $2.45 to $2.50. The guidance includes a 1.5% positive impact of currency translation at current rates.

The company continues to expect net sales to grow in the low single-digit range. Operating income is expected to increase in the low-single digits range.

Coca-Cola Enterprises expects free cash flow for full year 2013 to be around $500 million after adjusting increase in cash restructuring expenses in a range of $100 million to $125 million. Capital expenditure is expected to be in the range of $300--$325 million as against the prior guidance of $325 million. The company expects the weighted average cost of debt to be around 3% and effective tax rate to be in the range of 26% to 27%.

Coca-Cola Enterprises carries a Zacks Rank #2 (Buy). Some other consumer staples stocks that are worth a look include Inventure Foods, Inc. (SNAK - Snapshot Report) and Pinnacle Foods Inc. (PF - Snapshot Report) both carrying a Zacks Rank #2.
 

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