Coca-Cola Enterprises Inc. (CCE) recorded a 13.7% jump in second-quarter GAAP earnings to $356 million from $313 million in the year-ago period. Excluding special items, pro forma earnings per share came in at 79 cents, which topped the Zacks Consensus Estimate of 69 cents and grew 17.9% from 67 cents per share posted in the year-ago quarter. The better-than-expected result was primarily driven by higher volumes and cost containment initiatives.
Bolstered by the better-than-expected quarterly performance, Coca-Cola Enterprises expects full-year adjusted earnings in a range of $1.73 to $1.77 per share on the back of a 10% to 12% growth in operating income. The guidance is above the Zacks Consensus Estimate of $1.72 per share, which moved up 2 cents over the past month as 5 of 11 covering analysts raised expectations.
During the quarter, Coca-Cola Enterprises’ sales declined by a modest 0.5% to $5.88 billion from $5.91 billion in the year-ago period. The decrease was primarily attributable to unfavorable currency translations in Europe, which more than offset a 2% growth in overall volumes.
North American Division
Coca-Cola Enterprises’ flagship segment logged a 0.4% year-over-year growth in revenues to $4.2 billion, driven by a 0.5% growth in volumes and favorable currency translations. Operating income from the segment rose 23.2% year-over-year to $462 million, while operating margin expanded 210 basis points (bps) to 11.1%, primarily due to lower cost of sales and cost containment initiatives undertaken by management.
Coca-Cola Enterprises also stated that its previously announced deal with The Coca-Cola Co. (KO) remains on schedule to close in the fourth-quarter of 2010. Under the deal, Coca-Cola Co. has agreed to acquire Coca-Cola Enterprises’ North American operations, while Coca-Cola Enterprises will take over Coca-Cola Co.’s bottling operations in Norway and Sweden.
The segment’s revenues declined 2.4% year-over-year to $1.7 billion as a 5.5% growth in volumes was more than offset by unfavorable currency translations. The quarterly volume growth primarily benefitted from promotions related to World Cup soccer and expansion of still beverages portfolio. Operating income from the segment grew 5.8% year-over-year to $326 million, while operating margin rose 150 bps to 18.8%.
Balance Sheet and Cash Flow
Coca-Cola Enterprises exited the quarter with cash and cash equivalents of $1.2 billion, compared to $656 million in the year-ago period. The company’s long-term debt-to-capitalization ratio also improved to 87.5% at the end of the quarter from 95.0% in the year-ago period. During the first half of 2010, the company generated $391 million of cash from operations and deployed $371 million towards capital expenditure, $90 million towards dividends and $43 million towards debt repayment.