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Coca-Cola Enterprises Inc.’s (CCE - Analyst Report) first-quarter 2013 adjusted earnings of 39 cents per share beat the Zacks Consensus Estimate of 38 cents by a penny. Currency translation had an adverse impact of 1 cent per share. Adjusted earnings rose 8.3% year over year driven by operating income growth and lower share count resulting from share repurchases in the quarter.

The company’s right to acquire the German bottling business from The Coca-Cola Company (KO - Analyst Report) will expire on May 25. However, management has decided not to go ahead with the proposed buyout deal at this moment. This decision enabled Coca-Cola Enterprises to increase its share repurchase goal for the year.

Revenues and Margins

During the quarter, net sales dipped 1.0% to $1.90 billion. Reported revenues missed the Zacks Consensus Estimate of $1.91 billion.

The company’s overall results in the quarter were impacted by several challenges such as steep price competition in Great Britain, overall soft macro economic conditions and difficult beverage market conditions in France due to increase in French excise tax (FET).

The company’s net pricing per case increased 2.0% whereas cost of sales per case increased 3.0% in the quarter. Volumes (bottle and cans) declined 1.5% in the quarter owing to difficult macroeconomic conditions. However, the rate of decline was lower the year-ago period. Volumes declined 3.0% in continental Europe but improved 1.0% in Great Britain.

The volume of Sparkling drinks declined about 2%. Still beverages witnessed a modest decline, partially offset by a respective 3.5% and 4.0% volume growth in Coca-Cola Zero and energy drinks.

Adjusted operating income increased 3.5% to $180 million due to lower operating expenses reflecting the impact of one fewer selling day and the benefits of ongoing expense control and timing.

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, up from the prior expectation of $500 million.

Fiscal 2013 Outlook

Although the company increased its prior guidance for fiscal 2013 earnings to reflect higher share repurchase and it reduced its expectation for revenues. The company continues to expect currency neutral adjusted earnings growth to be in the range 11%—12%, up from 10% guided earlier. The target looks encouraging, considering it is higher than the company’s long-term target of high-single-digit growth.

At the current rates, currency translation is expected to reduce full-year earnings per share by approximately 1% to 2% in contrast to a 2% to 3% benefit expected earlier.

The company expects net sales to grow in the low to mid-single digits range (previous guidance was a mid-single digit increase) while operating income is expected to remain in mid-single digits. Management expects a moderately favorable commodity cost outlook for the remainder of the year.

Coca-Cola Enterprises expects free cash flow for fiscal 2013 to be around $450 to $500 million. Capital expenditure is expected to be around $350 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 28%.

Coca-Cola Enterprises carries a Zacks Rank #4(Sell).

Some other beverage companies including PepsiCo Inc. (PEP - Analyst Report), Coca-Cola CompanyandDr Pepper Snapple Group Inc. (DPS - Analyst Report) also delivered mixed results this season by beating our earnings estimate but missing out on revenues.

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