Shares of soft drink bottler Coca-Cola Enterprises Inc. rose on Wednesday after analysts said the largest Coca-Cola bottler's first-quarter performance handily beat expectations and raised price targets.
Shares of the Atlanta-based company rose 78 cents, or 4.9 percent, to $16.68 in midday trading Wednesday.
UBS analyst Kaumil S. Gajrawala raised his price target for the stock to $17 from $11, while Deutsche Bank-North America analyst Marc Greenberg raised his target by $1 to $17.
On Tuesday the company said its first-quarter profit rose sharply as it benefited from improving results in North America and cost cutting initiatives. The company earned 13 cents a share, or when items are excluded, 20 cents a share, in the three-month period ending April 3. Analysts had predicted earnings per share of 5 cents, excluding one time items. Revenue rose 3 percent to $5.05 billion, also beating estimates.
Gajrawala said the results show that pricing increases the company took in the fall and its restructuring efforts "have begun to favorably impact the bottom line." Overall volume fell 0.9 percent, with North American volume dropping 3 percent, but he said that too beat expectations.
He said he expects a "solid summer for U.S. bottlers" since they should benefit from pricing, productivity and volume growth in high-margin carbonated soft drinks.
Greenberg noted that the company's profits were better but wondered what was in store for the bottler, given rival PepsiCo Inc.'s move to buy its bottlers and consolidate those operations.
The decision, he said, "presents an able competitor with lower costs, and potentially a faster, more consumer-centric soft drink business."
He said the quarter's results for Coca-Cola Enterprises don't "provide enough confidence that the Coke system is back on track," but he said the performance was notable since the company hasn't posted such a strong surprise in some time.
The company offered 2009 guidance above analyst expectations, but cautioned the year will be a challenging one. It expects earnings per share to range from $1.24 to $1.29, topping the average analyst estimate of $1.20 per share.
Greenberg boosted his earnings per share estimate for 2009 from $1.23 to $1.28 and Gajrawala raised his per-share estimate from $1.18 to $1.27.