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North Carolina-based Coca-Cola Bottling Company Consolidated is set to report second quarter 2014 sales results on Aug 5 after the market closes. Last quarter, Coca-Cola Bottling posted a year-over-year decline of 34.5%. Let’s see how things are shaping up prior to the announcement.

Factors to Consider

Revenue management, distribution cost management, product innovation and beverage portfolio expansion have remained Coca-Cola Bottling Co.’s strengths over the past many quarters. Historically too, the company generates higher unit sales in the second and third quarters versus the first and fourth quarters of the fiscal year due to business seasonality.

Innovation has been and will continue to be important to the company’s overall revenue. Meanwhile, the company continues to focus on pricing and packaging of its brands. Some past innovations including the 1.25-liter bottle and the 7.5-ounce sleek can have benefited the company. During the first quarter, the company introduced the 253 ml bottle for certain Coca-Cola products, which are expected to boost revenues in the upcoming quarter.

The company posted sales growth of about 1% in the first quarter with volume growth of just under 2%. However, earnings declined significantly by 34.5% due to higher selling, delivery and administrative (SG&A) expenses to grow revenue, gross margin and market share on a longer-term basis.

For the second quarter, the Zacks Consensus Estimate is pegged at 18 cents, which is way behind earnings of $1.22 per share posted in the second quarter of 2013. Revenue as per the Zacks Consensus Estimate is $385 million, which is also lower than last year’s sales of $428.9 million. We believe the company will continue to incur higher SG&A expenses in the upcoming quarter to drive its revenues.

We note that in May Coca-Cola Bottling Co. had signed a definitive agreement with The Coca-Cola Company (KO - Analyst Report) to expand the bottler’s franchise territory to include the Morristown and Johnson City, TN territories. Currently, these two territories are served by Coca-Cola Refreshments USA, Inc. (CCR), a wholly-owned subsidiary of The Coca-Cola Company. The agreement will provide the company exclusive rights to distribute brands owned by The Coca-Cola Company in these territories. Also, Coca-Cola bottling co. will be able to distribute certain other brands not owned by The Coca-Cola Company but currently being distributed in the Morristown and Johnson City territories by CCR.

Coca-Cola Bottling produces, markets and distributes non-alcoholic beverages, primarily products of The Coca-Cola Company. The company is the largest independent bottler of products of The Coca-Cola Company in the United States, distributing these products in eleven states primarily in the Southeast. The company also has similar agreements with Dr Pepper Snapple Group, Inc. (DPS - Analyst Report) and other beverage companies to produce, distribute and market their products in some of its regions.

The western European bottler of The Coca-Cola Company - Coca-Cola Enterprises Inc. (CCE - Analyst Report) recently reported second-quarter 2014, wherein the adjusted earnings beat the Zacks Consensus Estimate, while revenues missed the same.

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