The maturing carbonated beverages category has resulted in the Coca-Cola Enterprises, Inc. (CCE) management announcing a strategic restructuring program emphasizing the growth categories of non-carbonated beverages and low calorie sodas. The plan should mitigate the impact of higher input costs from increases in the prices of aluminum cans and high fructose corn syrup.

However, the weak economic environment in North America and subsequent softer-than-expected volume are concerning. Despite the stock being in the lower end of the historical valuation range, the Hold recommendation is being maintained until there are signs of stabilization in North America.

With a strong relationship with Coca-Cola (KO) and a financially leveraged balance sheet, Coca-Cola Enterprises stock has traded in a P/E multiple range of 12 to 20 over the last five years. At the current P/E of 12.6, the stock is becoming attractive, but given the near-term weakness in North America, it is prudent to wait until there are signs of stabilization. Significant upside potential in Coca-Cola Enterprises’ stock is not expected until CSD volumes or consolidated company volume in North America begins to improve at a mid single-digit growth rate. The stock’s target price is $19, based on a 14 P/E on trailing 12-month earnings.

Read the full analyst report on CCE

Read the full analyst report on KO

“CCE” Free Stock Analysis: Buy? Sell? Hold?
“KO” Free Stock Analysis: Buy? Sell? Hold?
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