Market Overview

Coca-Cola Bottling Earnings Preview: Double-Digit EPS Growth Expected

Coca-Cola Bottling (NYSE: COKE) is scheduled to report fourth-quarter 2011 results tomorrow, March 7, after the markets close. Back in the third-quarter report, CEO J. Frank Harrison III said, “2011 has been a challenging year as the economy remains weak and commodity costs continue to increase at rates that exceed the rate of inflation.” But an unexpectedly strong holiday season and economic data since indicate that consumer spending is on the rise. The question for investors is how that may have influenced Coca-Cola Bottling's results.

Analysts on average predict that the second-largest Coca-Cola bottler in the United States will post per-share earnings that are 41.4% higher than a year ago to $0.70 for the quarter. That EPS estimate is the same as 60 days ago. But note that per-share earnings have topped consensus estimates in only two in the past six quarters. Fourth-quarter revenue is expected to total $409.3 million, which would be only a marginal increase from the previous quarter.

Looking back to the third quarter, the bottling company said it earned $9.8 million, or $1.06 per diluted share, falling short of analysts' estimates. Sales totaled $405.9 million, or 2.6% higher than in third quarter of the previous year. The company attributed the disappointing quarterly results to recession-weary consumers and increasing raw-material costs.

For the full year, the consensus forecast calls for $3.60 per share earnings on revenue of $1.6 billion. That compares to $3.90 per share and $1.5 billion last year. That EPS estimate is also the same as it was 60 days ago.

The Company

Coca-Cola Bottling Co. Consolidated produces, markets and distributes nonalcoholic beverages, primarily products of Coca-Cola (NYSE: KO), including POWERade, Minute Maid and Dasani. The company also distributes Dr Pepper and Monster energy drinks, and it produces beverages for other Coca-Cola bottlers, as well as provides restaurants and other outlets with fountain products. The company is headquartered in Charlotte, N.C. It was founded in 1902 and now has a market cap of $592.6 million.

Competitors include Coca-Cola Enterprises (NYSE: CCE), Coca-Cola FEMSA (NYSE: KOF), Coca-Cola Hellenic Bottling (NYSE: CCH), Dr Pepper Snapple Group (NYSE: DPS) and National Beverage (NASDAQ: FIZZ). Coca-Cola Enterprises posted better-than-expected fourth quarter EPS and sales up 5.5% year over year. Dr Pepper's EPS also topped fourth-quarter estimates and its sales were 3.0% higher. Coca-Cola FEMSA and National Beverage posted EPS and sales growth for their most recent quarters as well.

See also: Coca-Cola Enterprises to Increase Quarterly Dividend by 23%, Dr Pepper Snapple Group Raises Quarterly Dividend by 6.3%, and Could 2012 Be a Strong Year for National Beverage?

During the three months that ended in December, Coca-Cola Bottling struck a deal to extend a pricing agreement with Coca-Cola. The bottler also made moves to reduce supply chain costs in an effort to maximize its gross margin.

Performance

The forward earnings multiple is less than the industry average P/E ratio. The company's operating margin is less than the industry average, but its return on equity is 20.7%. Coca-Cola Bottling has a dividend rate of 1.6%. Short interest is 2.4% of the float. Only one analyst polled follows the stock, and that analyst has rated it at Hold for the past three months.

Shares have traded around $64 since early February, with the 50-day moving average crossing above the 200-day moving average last week. But the share price is up more than 10% year to date and more than 29% higher than the 52-week low back in November. The stock hit a multiyear high of $76.32 last April. Over the past six months, the stock outperformed all of the competitors mentioned above.

ACTION ITEMS:

Bullish: Investors interested in exchange traded funds invested in Coca-Cola Bottling might want to consider the following trades:

  • PowerShares FTSE RAFI US 1500 Small-Mid (NASDAQ: PRFZ) is almost 10% higher year to date.
  • PowerShares Fundamental Pure Small Value (NYSE: PXSV) is more than 9% higher year to date.
  • WisdomTree SmallCap Earnings (NYSE: EES) is about 8% higher year to date.
Bearish:

Traders may prefer to consider these alternative positions in the same industry:

  • Jones Soda (NASDAQ: JSDA) is up almost 38% year to date.
  • Monster Beverage (NASDAQ: MNST) is up more than 25% year to date.
  • SodaStream International (NASDAQ: SODA) is up more than 14% year to date.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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