On Thursday, Kepler Cheuvreux initiated coverage on Coca-Cola (NYSE:KO) HBC AG (LSE:CCH) (OTC:CCHGY) with a Hold rating and a price target set at GBP29.20. The firm's analysis suggests a cautious outlook on the beverage company's growth potential, despite acknowledging Coca-Cola HBC's recent share price performance and return on invested capital (ROIC) improvements.
The stock has shown impressive momentum, delivering a 25.44% year-to-date return and currently trades near its 52-week high of $37.58. According to InvestingPro data, the company maintains a "GOOD" overall financial health score, with particularly strong marks in profitability metrics.
The firm estimates an underlying growth of approximately 4.5% in the markets Coca-Cola HBC operates in across Europe and Africa. However, it tempers expectations of the company's medium-term top-line growth forecast of 6-7%, proposing a more conservative 5.5-6.0% growth prediction.
This is based on expectations of lower market share gains than what Coca-Cola HBC anticipates would be necessary to achieve its growth targets. With current annual revenue of $11.07 billion and a market capitalization of $13.07 billion, InvestingPro subscribers can access detailed growth metrics and additional insights through exclusive ProTips.
Coca-Cola HBC has experienced a sharp rise in ROIC in recent years, which has been a contributing factor to its strong share price performance. Kepler Cheuvreux anticipates that the future ROIC will stabilize around 18% as the potential for margin improvements and capital efficiency gains are fully realized.
Looking ahead, the firm forecasts approximately 7% growth in earnings before interest and taxes (EBIT) and 9% growth in earnings per share (EPS) for Coca-Cola HBC in the coming years. These projections are made while considering key risks such as the company's exposure to the Russian market and economic volatility in Africa.
The price target of 2,920p (GBP29.20) implies an 8x 2025 estimated enterprise value to EBITDA (EV/EBITDA) multiple. This is slightly below the five-year average of 8.5x. The lower multiple reflects expectations for a normalization in top-line and EBIT growth, as well as a more stable ROIC for Coca-Cola HBC in the years ahead.
In other recent news, Coca-Cola HBC has received an upgrade from BNP Paribas (OTC:BNPQY) Exane, shifting its stock rating from Neutral to Outperform. The firm also increased the price target for Coca-Cola HBC, anticipating a like-for-like (LFL) sales growth of 8.8% in 2025, surpassing the average sector expectation. This projection is based on the company's solid performance, with revenue of $11.1 billion in the last twelve months, and a healthy gross profit margin of 35.5%.
In addition, BNP Paribas Exane expects this growth to drive upward revisions in consensus earnings per share (EPS) forecasts, potentially leading to a re-rating of Coca-Cola HBC's stock. The firm also noted the potential impact of geopolitical developments on Coca-Cola HBC's market valuation.
Simultaneously, Bernstein SocGen Group initiated coverage on Coca-Cola Hellenic, assigning an Outperform rating. The firm forecasts a 7.7% normalized net sales growth for Coca-Cola Hellenic, driven by performance in emerging and developing markets. Despite potential risks associated with foreign exchange and operating a Russian business at arm's length, Bernstein believes the stock has been undervalued.
Bernstein's analysis suggests that even without considering the Russian segment, Coca-Cola Hellenic is trading at an attractive valuation. Both these recent developments reflect positive expectations for Coca-Cola HBC's financial performance.
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