J.P Morgan Comments On Coca-Cola Enterprises In-Line Earnings Report

Coca-Cola Enterprises CCE reported comparable Q4 EPS of $0.28, in line with consensus and J.P Morgan's estimate. Revenue was slightly higher than JPM's estimate with help from an extra selling day in the quarter, partially offset by a slightly h\igher drag from FX. While the gross margin and SG&A ratio were off it was more a function of the new business structure. Operating profit came in right in-line and the quarter was relatively uneventful. In 2011, the company should benefit from steady organic topline growth in the mid-single digits, along with help from favorable FX. In addition, the $1B stock buyback program should boost its normalized growth rate by several hundred bp. Lastly, the company maintained that they will only see commodity cost inflation in the low single digit range, given their new basket of exposure, and their hedging policies. At 13x JPM's 2011 EPS estimate, it thinks the stock looks fairly valued. While other European bottlers are trading at slightly higher multiples in their local exchanges, they have less fx risk. Its price target for December 2011 is $28. This implies 12x 2012 EPS estimate which is slightly below the current and historical average trends. J.P Morgan has a Neutral rating on CCE CCE closed Friday at $26.24