Coca-Cola Enterprises (CCE) Makes Decent Gains in 2016

At the start of 2016, Coca-Cola (CCE) opened at $49.44 per share and is now trading at $53.61 per share for an appreciation of 8.94% for the year to date. At present prices, the company has a market capitalization of $12.23 billion, along with a 52-week high of $50.54 and a 52-week low of $42.13. The price/earnings ratio is 21.13 which is well within the acceptable range of 20 to 30 times earnings. The earnings per share is $2.54 and the dividend & yield was last measured at 1.20. Based on analyst forecasts, the 1-year target estimate price is $54.33 per share. Turning our attention to the recommendation summary for the stock, Coca-Cola Enterprises Inc. has a mean recommendation of 2.8 according to Thompson/First Call. For the week ending Friday, 15 April, the mean recommendation was 2.9 indicating that the stock has moved closer to a strong buy. The rating scale runs from 1.0 (strong buy) to 5.0 (strong sell). The mean target price is marginally higher than the current price at $54.33 per share, with a high target price of $65 per share and a low target price of $49 per share. Before we examine the earnings surprise history of the stock over the past 1 year, it’s important to take a look at the upgrades/downgrades history of Coca-Cola Enterprises Inc.:

• On 13 August 2015, Credit Agricole upgraded Coca-Cola Enterprises Inc. from an underperform rating to an outperform rating.
• On 8 September 2015, RBC Capital Markets downgraded Coca-Cola Enterprises Inc. from an outperform rating to a sector perform rating.
• On 14 April 2016, Stifel upgraded Coca-Cola Enterprises Inc. from a hold rating to a buy rating.

Over the course of the past 3 months, the trends have ebbed and flowed from a majority hold decision with a strong focus on buy and strong buy recommendations. That remains the case today. For the current quarter, analysts are of the opinion that the EPS will come in at $0.40, and at $0.84 for Q2 2016. If we take a look at the earnings surprise history over the past 1 year, it paints an interesting picture.

• On 30 April 2015, the consensus EPS forecast for Coca-Cola Enterprises Inc. was $0.41 and the actual EPS was $0.42 leading to a +2.44% earnings surprise.
• On 30 July 2015, the consensus EPS forecast was $0.76 and the actual EPS came in at $0.79 for a +3.95% earnings surprise.
• On 29 October 2015, the consensus EPS forecast was $0.81 and the actual EPS came in at $0.84 for a +3.7% earnings surprise.

On 11 February 2016, the consensus EPS forecast was $0.51 and the actual EPS was $0.53 for a +3.92% earnings surprise.

The Coca-Cola Enterprises income statement has reflected mixed performance since December 31, 2013 to December 31, 2015. According to the figures, gross profit came in at $2.862 billion for December 31, 2013 and then increased to $2.973 billion in 2014, but declined to $2.570 billion in 2015. In much the same fashion, total operating income increased from $914 million in 2013 to $1.019 billion in 2014, and declined to $866 million in 2015. The company’s net income has been declining ever since December 31, 2013 when it was measured at $667 million, and then dropped to $663 million on December 31, 2014 and declined further to $596 million on December 31, 2015.  Based on the performance of Coca-Cola Enterprises over time, one would expect the quarterly performance to once again outperform the lackluster S&P 500 index.The bullish sentiment with Coca-Cola Enterprises Inc. is evident in the many strengths of the company including rising net income, stable stock price performance, strong ROE, increasing profitability and good EPS. On the flipside, the company has rather high levels of debt management risk.