##{"id":59331,"date":"2011-12-19T11:29:08","date_gmt":"2011-12-19T00:29:08","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/12\/19\/coca-cola-amatil-trading-update-lacks-fizz\/"},"modified":"2011-12-19T11:29:08","modified_gmt":"2011-12-19T00:29:08","slug":"coca-cola-amatil-trading-update-lacks-fizz","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/12\/19\/coca-cola-amatil-trading-update-lacks-fizz\/","title":{"rendered":"Coca-Cola Amatil Trading Update Lacks Fizz"},"content":{"rendered":"

\n\t– Coca-Cola on Friday updated earnings guidance
\n\t– Guidance broadly disappointed (as predicted by some)
\n\t– Estimates trimmed across the market
\n\t– Credit Suisse downgrades to an Underperform<\/span> rating<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tOn Friday Coca-Cola Amatil<\/span> ((CCL<\/span>)) offered a trading update to the market, management indicating net profit after tax growth for the second half of 2011 was likely to be in the order of 4.5%. This compares to previous indications of a result in excess of the 5.5% recorded in the first half of the year.<\/p>\n

\n\tThe update was no great surprise in the view of UBS, as consumer spending remains subdued thanks to a tough retail environment and given recent cold and wet weather continues to impact on demand for Coca-Cola's products.<\/p>\n

\n\tThe other factor impacting on earnings has been a dispute with Woolworths ((WOW)), Citi<\/span> noting this has contributed to some margin pressure. A concern for the broker is this implies some questions with respect to the sustainability of consistent margin expansion that has been a feature for Coca-Cola Amatil<\/span> in recent years.<\/p>\n

\n\tThe weather is no excuse in the view of JP Morgan, who had expected a better result given Coca-Cola is cycling a 4.7% decline in Australian volumes stemming from the wet conditions experienced at the end of last year.<\/p>\n

\n\tThis suggests to JP Morgan underlying performance was weak, as Project Zero had been expected to deliver around $10 million in earnings growth on its own and the guidance offered suggests pre-tax profit growth of around $18 million.<\/p>\n

\n\tWhat could be a positive for Coca-Cola Amatil<\/span> according to JP Morgan is evidence of some supply disruptions at competitor Schweppes, where operations are struggling somewhat given industrial action and carbon dioxide supply constraints.<\/p>\n

\n\tTo reflect the update from Coca-Cola Amatil<\/span>, stockbrokers have been quick to adjust earnings estimates. JP Morgan has trimmed its numbers by 3.9% for 2011 and by 0.6% in 2012, while Citi's<\/span> numbers have come down by around 1% in each year.<\/p>\n

\n\tUBS has reacted more like JP Morgan in cutting its numbers for this year by 3%, while Credit Suisse makes no changes to its estimates. Consensus earnings per share (EPS) numbers for Coca-Cola according to the FNArena<\/span> database now stand at 70.3c<\/span> this year and 77.4c<\/span> in 2012.<\/p>\n

\n\tLooking forward, broker opinions on Coca-Cola Amatil<\/span> remain mixed. Buy ratings continue to dominate with four out of eight, Deutsche Bank summing up the positive argument by seeing a premium for the stock as justified given solid management, an expected improvement in earnings growth in 2012, a strong balance sheet and defensive earnings.<\/p>\n

\n\tCiti<\/span> sees a Neutral rating as more appropriate given the potential for the Australian pricing dynamic, which is very important for earnings at Coca-Cola, to be threatened by the new grocery paradigm. While there is some scope for price increases next month to ease the pressure on margins, Citi<\/span> continues to see earnings risk as to the downside.<\/p>\n

\n\tCredit Suisse has gone a step further, downgrading to an Underperform<\/span> rating on Coca-Cola from Outperform previously. This is a valuation call, as the broker sees scope for the stock to hold its historical average earnings multiple of 15.5 times despite moving into a period of slower growth. Credit Suisse currently has the only negative rating on Coca-Cola in the FNArena<\/span> database.<\/p>\n

\n\tShares in Coca-Cola today are down in early trading and as at 11.10am<\/span> the stock was 11c<\/span> lower at $11.91. This compares to a trading range over the past year of $10.04 to $12.47. Relative to the consensus price target in the FNArena<\/span> database of $12.92 the current share price implies upside of around 9%.<\/p>\n

\n\t <\/p>\n

\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"