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On Tuesday, Bernstein analysts increased their price target on Coca-Cola (NYSE:KO) HBC AG (CCH:LN) (OTC: CCHGY) shares to GBP38.50, up from the previous GBP36.25, while reiterating an Outperform rating on the stock. The firm's analysis suggests that Coca-Cola HBC is an underappreciated emerging markets opportunity with a potential 16% upside. This view aligns with InvestingPro data showing the stock's impressive 25% year-to-date return and current Fair Value assessment indicating potential undervaluation. Two key InvestingPro Tips highlight the company's strong financial position: trading at an attractive P/E relative to growth and maintaining solid liquidity. (Discover 4 additional ProTips with an InvestingPro subscription).
The company is anticipated to see around 7.5% normalized net sales growth in constant currency terms, with the growth in Emerging and Developing markets expected to balance out the slower growth in Established markets. Bernstein foresees a rise in profit margins similar to that of Coca-Cola European Partners (NASDAQ:CCEP) and believes that the return of cash to shareholders will contribute to approximately a 13% normalized earnings per share (EPS) compound annual growth rate (CAGR). The company's current P/E ratio of 17.95x and PEG ratio of 0.54x suggest attractive valuation metrics relative to its growth prospects. InvestingPro analysis reveals strong fundamentals with a healthy current ratio of 1.17 and moderate debt levels.
While acknowledging that this higher growth is accompanied by certain risks, such as foreign exchange volatility, particularly with the Nigerian Naira (NGN) and Egyptian Pound (EGP), as well as operational challenges in the Russian market, Bernstein points out recent positive developments. These include the NGN and EGP stabilizing after last year’s devaluation and a perceived increase in the likelihood of a resolution to the Russia-Ukraine conflict following comments by President Trump.
Despite the challenges, Bernstein's valuation of Coca-Cola HBC excludes its Russian operations, and even without this segment, the stock is currently trading at approximately 12.0x enterprise value to earnings before interest and taxes (EV/EBIT) for the next twelve months plus one, which is below the approximately 14.0x the firm believes is justified.
In other recent news, Coca-Cola HBC has seen updates from analysts regarding its financial outlook. Jefferies analyst Edward Mundy raised the company's price target from £32.00 to £37.50, maintaining a Buy rating. Mundy noted the company's strong performance in its core business segments and its ability to manage market fluctuations effectively. Jefferies' revised target reflects an expected P/E ratio of 14.3x for 2026, which is considered lower compared to the industry average, suggesting potential investment appeal.
Additionally, Bernstein SocGen Group also increased Coca-Cola HBC's price target to GBP 35.00 from GBP 34.50, reiterating an Outperform rating. Bernstein highlighted the company's growth prospects, especially in emerging markets, predicting a 7.5% normalized net sales growth in constant currency terms. The analysis anticipates a 13% normalized EPS compound annual growth rate, driven by market performance and margin expansion. Despite risks related to foreign exchange and operations in Russia, Bernstein views the stock's valuation as attractive, supporting the improved price target.
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