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While Coca-Cola Enterprises, Inc.’s (CCE - Analyst Report) third-quarter 2013 results improved from a weaker first half, management remains cautious for the next quarter and year due to continued operating and marketplace challenges.

Recently, the western European bottler of The Coca-Cola Company (KO - Analyst Report) provided a business update where it maintained the fiscal 2013 outlook. However, management’s expectations for fiscal 2014 fell short of its long-term targets as the industry conditions continue to be tough.

2014 Outlook below Long-Term Guidance

In 2014, adjusted earnings are expected to grow approximately 10% in constant currency terms. In addition, currency is expected to benefit 2014 earnings per share in the range of 3%–4%.

While adjusted constant currency net sales are expected to grow in the low single-digit range, operating income is expected to grow in the mid single-digit range. Management’s 2014 revenue and operating income outlooks are below the long-term targets of 4% to 6% and 6% to 8%, respectively. Though the earnings per share guidance of approximately 10% growth is above the long-term target of high single-digit range growth, it will be mostly driven by share buybacks.

The company has been facing many operating and marketplace challenges. Changing consumer preferences, increasing health consciousness, rising obesity concerns and growing regulatory concerns are exerting significant pressure on the carbonated soft drinks category in North America. Moreover, the company is geographically focused in Western Europe and is thus exposed to the economic uncertainties of this region, including the debt burdens of some of these countries and the challenging consumer spending environment.

Management believes that these challenges will continue to persist and create uncertainty for growth in 2014. Accordingly, management’s outlook for 2014 is below its long-term targets.

Cost of goods sold is expected to increase in a range of 2% to 2.5%. Moreover, interest and taxes are expected to be higher in 2014 versus 2013.

In order to drive growth in 2014, management will once again resort to aggressive marketing initiatives and packaging innovation. Management will build on the success of its “Share a Coke” campaign; capitalize on the 2014 football World Cup championship; and increase the focus on Coke Zero, its low calorie version of Coke and energy drinks. In addition, the company will introduce its popular 1.75 liter bottle in Great Britain as the new primary large PET package.

Coca-Cola Enterprises expects free cash flow for full-year 2014 to be in the range of $600 million–$650 million. Capital expenditures are expected to be approximately $350 million. The company expects the weighted average cost of debt to be around 3%. The effective tax rate is expected in a range of 26% to 28%.

Fiscal 2013 Outlook Maintained

In fiscal 2013, the company continues to expect its adjusted earnings per share to remain in the upper half of the previously guided range $2.45 to $2.50. However, the guidance now includes a 2.0% positive impact from currency, higher than prior expectations of less than 1.5%.

The company continues to expect adjusted net sales (including currency impact) to grow in the low single-digit range in fiscal 2013.

Adjusted operating income (including currency impact) is expected to increase in the low single-digit range. We would like to remind investors that during the third-quarter conference call, operating income guidance was lowered from prior expectations of increase in the low-to-mid single-digits range. Moreover, the operating income guidance includes the expected currency benefits which were previously excluded from the outlook.

New Share Repurchase Program

The company expects to repurchase shares worth at least $1 billion (under its $1.5 billion plan) by the end of 2013. Year-to-date, through the third quarter, the company has repurchased approximately $900 million worth of its stock. In addition, the board of directors of Coca-Cola Enterprises authorized a new $1 billion share buyback program. In 2014, the company expects to buyback $800 million worth of stock.

Coca-Cola Enterprises carries a Zacks Rank #3 (Hold). A better-ranked beverage stocks is The WhiteWave Foods Company (WWAV - Snapshot Report) which carries a Zacks Rank #2 (Buy). Another consumer staple company worth considering is Green Mountain Coffee Roasters, Inc. (GMCR - Analyst Report) carrying a Zacks Rank #2.

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