US: Analyst upgrades Coca-Cola Enterprises on Coca-Cola deal
Swartzberg said he predicts a 3% increase in CCE volume in the next quarter
Analyst group Stifel Nicolaus has upgraded Coca-Cola Enterprises (CCE), despite anxiety over Europe’s economic outlook.
Stifel Nicolaus analyst Mark Swartzberg said that, while CCE shares rallied on the news of Coca-Cola Co's pending purchase of CCE North America in March, a recent slump due to an uncertain European economic outlook spells an opportunity for investors.
“We believe new CCE should trade at a premium multiple to old CCE, in contrast to a discount to CCE's historical range,” the Swartzberg said yesterday (1 June).
“We attribute the seeming market disconnect to temporary factors such as pending fulfilment of deal conditions and high anxiety over Europe’s economic outlook."
He added: “New CCE’s economic metrics are superior to those of old CCE and, in some cases, superior to those of Coca-Cola Hellenic, new CCE’s best peer, in our opinion.”
In March, CCE agreed to buy Coca-Cola Co’s bottling operations in Norway and Sweden for $822m.
Last month, the firm saw its first-quarter sales in Europe increase by 8% and 1.5% in value and volume, respectively.
Swartzberg said he predicts an improvement in Europe volume when the firm releases its quarterly results in June. He estimated a 3% increase, up 1.5% from the first-quarter.
The analyst said he also expects more quarters of mid single-digit currency-neutral EBITDA growth.
“We see 22% upside potential to new CCE’s estimated embedded market price, or a 12-month target of $20 for new CCE plus $10 for the planned cash payment early in 4Q,” Swartzberg added.
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