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On Jun 12, we issued an updated research report on Coca-Cola Enterprises Inc. (CCE - Analyst Report).

On Apr 24, Coca-Cola Enterprises announced mixed first-quarter 2014 results. Adjusted earnings of 46 cents per share beat the Zacks Consensus Estimate by 4.5%. Earnings increased 17.9% over the prior-year quarter driven by cost control and favorable currency benefits. Revenues, in contrast, fell short of the Zacks Consensus Estimate but grew only 1% year over year due to volumes declines, mainly in Great Britain. However, margins improved once again due to lower operating expenses.

More than 90% of the sales volume of Coca-Cola Enterprises comprises The Coca-Cola Company (KO - Analyst Report) products. In Oct 2012, Coca-Cola Enterprises sold its North American operations to The Coca-Cola Company and took over the latter’s bottling operations in Norway and Sweden.

Coca-Cola Enterprises is thus, geographically focused in Western Europe and is exposed to the economic uncertainties of this region.

Coca-Cola Enterprises has been facing many operating and marketplace challenges lately. These include steep price competition in Great Britain, overall soft macroeconomic conditions and difficult beverage market conditions in France due to increase in French excise tax. Management believes that these challenges will persist, making growth in 2014 uncertain.

However, the company enjoys strong fundamentals including a strong brand portfolio, solid share buyback program and aggressive cost cutting initiatives. However, with the ongoing macro pressure in Europe affecting sales, the company is forced to drive profit only through cost cutting and share repurchases. Though economic conditions have improved somewhat in European countries, a sustained improvement in volumes is necessary.

Other Stocks to Consider

Coca-Cola Enterprises carries a Zacks Rank #3 (Hold). Better-ranked beverage stocks include The WhiteWave Foods Company (WWAV - Snapshot Report) and Dr Pepper Snapple Group, Inc. (DPS - Analyst Report). Both the companies carry a Zacks Rank #2 (Buy).

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