Coca-Cola HBC is expected to fall short of its €860-€900mln guidance for underlying earnings when it posts full-year results, analysts at Citi bank and Credit Suisse believe.
The Coca-Cola bottling company will likely meet organic guidance for the financial year but deterioration to currencies such as the Egyptian pound and the Russian rouble are set to damage earnings, Citi said.
Looking ahead, the company’s earnings per share forecast has been reduced by 5% by the US bank, or 3% lower than Vision Alpha’s consensus.
Whilst the price to earnings multiple of 13.7 might appear cheap, a 25% discount to wider staples, it is important to factor in the loss in earnings from exiting Russia, Citi stated.
Taking this into account, the bank believes a lower price to earnings multiple of 12, indicating a limited upside, is more realistic.
Forecasts for 2023 are anticipated to err on the side of caution as ceasing business in Russia and pricing and inflation could affect sales volumes, brokers at Credit Suisse said.
The Swiss bank predicts 8.5% increase to organic revenues in the fourth quarter while volumes will fall by 7.5% quarter on quarter.
“In 2023, we expect another year of gross margin pressure from input costs in the mid-teens driving gross profit by one percent,” said Credit Suisse.
The bank also believes prices will increase by 11% in order to combat the cost pressures.
Credit Suisse rates Coca-Cola HBC as “outperform” targeting a £25 share price, whilst Citi bank has a “neutral” rating for the stock with a £21.25 target price.
Shares for the business are trading at £19.48.