Coca-Cola Enterprises (CCE) has had its coverage cut. Legg Mason said yesterday (26 October) that it was reducing its rating on the bottler to 'hold' from 'buy.'

In a note to clients yesterday, Legg Mason's Mark Swartzberg said: "Northwest Europe … represents the remaining 35% of profits, and we favour the downbeat outlook issued last week by The Coca-Cola Company to that provided by CCE management in early September."

"Pennies off an earnings estimate is a limited negative, and we see factors supporting the shares in and around current levels," Swartzberg added. "But we also think it is unlikely that the shares will produce significant 12-month upside. Growth is expected to remain elusive in the high-margin region of Europe; the input cost environment is expected to remain challenging; and although we believe negative earnings revisions are largely expected, we expect consensus estimates to continue coming down."

Legg Mason forecast volumes for CCE Europe to drop by 6% in 4Q, versus down 1% previously, and to fall by 2% in 2006, versus up 2% previously. "Our 4Q and 2006 EPS estimates go to US$0.11 from US$0.13 and to US$1.33 from US$1.37, respectively," Swartzberg concluded.