UPDATE 4-Coke Enterprises tops Street view, raises forecast

Wed Jul 29, 2009 12:50pm EDT

* Q2 EPS $0.67 tops Wall St view of $0.51

* Sees '09 EPS $1.44-$1.49; previous view $1.24-$1.29

* Raises dividend payout 14 pct

* Shares up 2.7 percent after setting new year high (Adds comments from executives, analyst)

By Jessica Wohl

CHICAGO, July 29 (Reuters) - Coca-Cola Enterprises Inc (CCE.N), the largest bottler of Coca-Cola Co (KO.N) drinks, blew past Wall Street's quarterly profit forecast on Wednesday, helped by price increases in North America and growth in Europe.

Coke Enterprises also raised its 2009 earnings outlook and increased its annual dividend by 4 cents per share, or about 14 percent. Its shares jumped to their highest level in 13 months before paring the gains and were up 2 percent at $18.81 midday.

The company said it expected tough economic conditions to persist, but saw the impact of currency fluctuations moderating. It raised its full-year profit forecast 20 cents per share.

"Based on the better (first half), this is a conservative second half view," Deutsche Bank analyst Marc Greenberg said in a note to clients.

The results came on the heels of better-than-expected profits from Coke, PepsiCo Inc (PEP.N) and Pepsi's two largest bottlers earlier this month, and soft drink rival Dr Pepper Snapple Group Inc (DPS.N) back in May. [ID:nBNG501921]

Bottlers buy concentrate and then bottle and distribute soft drinks. Easing transportation and materials costs have helped them mitigate the impact of consumers' frugal purchasing and moves away from some higher-end drinks such as bottled teas.

The U.S. market for drinks continues to be rough, especially in restaurants. Sales at convenience stores showed some strength as gas prices have fallen, executives said on a conference call.

Some analysts saw Coke Enterprises as a potential takeover target after PepsiCo offered to buy its largest bottlers, Pepsi Bottling Group Inc PBG.N and PepsiAmericas Inc PAS.N, in April. Those companies rejected PepsiCo's bid as too low.

Coke and Coke Enterprises have been working to trim costs through their Coca-Cola Supply venture. Their relationship is "excellent," and is the best it has been in a long time, Coke Enterprises Chief Executive John Brock said on the call.

Deutsche Bank's Greenberg raised his price target by $2 to $19 but kept his "hold" rating on the stock. He said Coke "is steadfastly not a buyer" of Coke Enterprises.

PROFIT TOPS VIEW

Coke Enterprises reported second-quarter net profit of $313 million, or 64 cents per share, compared with a year-earlier loss of $3.17 billion, or $6.48 per share, that included a hefty impairment charge.

It earned 67 cents per share excluding restructuring charges, topping the analysts' average forecast of 51 cents, according to Reuters Estimates.

Net operating revenue slipped less than 0.5 percent to $5.91 billion. Analysts forecast revenue of $5.97 billion.

While revenue declined more than expected, margins were stronger than anticipated, Stifel Nicolaus analyst Mark Swartzberg said in a note to clients.

The volume of drinks sold fell 1 percent, a steeper drop than the 0.5 percent decline seen in the first quarter but not as severe as the drops of 4 percent that Pepsi Bottling posted [ID:nBNG152635] or 5 percent that PepsiAmericas reported.

U.S. sales of cold 20-ounce bottles of soft drinks have done well even though 16-ounce cold bottles of Coca-Cola are now being offered for 99 cents, the company said. Still, sales of single-serve drinks fell more than larger multi-serving packs.

Volume fell 3 percent in North America and rose 6 percent in Europe. Prices rose 8 percent in North America and 4 percent in Europe. Coca-Cola Zero sold well in both markets.

Coke Enterprises raised its 2009 profit forecast by 20 cents per share to a range of $1.44 to $1.49. Analysts on average were expecting a full-year profit of $1.33 per share.

The company expects North American revenue to rise at a low-to-mid-single-digit percentage rate despite a drop in volume. It forecast mid-single-digit revenue growth in Europe, with volume up in the low single-digits. (Reporting by Jessica Wohl; Editing by Lisa Von Ahn, Maureen Bavdek, Phil Berlowitz)

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