Coca-Cola Hellenic: Think Strength

Coca-Cola Hellenic Bottling Company (CCH - Analyst Report) will report first half 2009 financial results on Thursday, August 6th at 8:30 am Athens Time (1:30 am New York Time). We are expecting second quarter earnings of $0.59 and rate the stock a Buy.

Since the company conducts business and reports financial results in Euros, much of the stock’s performance is inversely correlated with US dollar’s exchange rate with the Euro. Exchange rates are a key driver of the company’s financial results, and hence, the stock’s price. Much of the stock’s outperformance in 2007 was due to US dollar weakness relative to the Euro.

Earnings results for the second quarter of 2009 will be negatively impacted by the year-over-year 10% decline in the Euro versus the US Dollar. Hence, our $0.59 estimate represents a 24% year-over-year decline from the $0.78 reported in the comparable prior-year quarter.

However, management has a sound business strategy and proven execution skills. The company enjoys a broad mix of geographies, a diversified portfolio of beverage brands and strong marketplace execution. Coca-Cola Hellenic Bottling Company is one of the largest bottlers of soft drinks in Europe, operating in 28 countries. The recent earnings weakness in terms of year-over-year comparisons is providing a valuation-based buying opportunity.