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On Tuesday, Kepler Cheuvreux analyst Richard Withagen downgraded shares of Coca-Cola (NYSE:KO) Europacific Partners (CCEP:NA) (NASDAQ: CCEP) from Hold to Reduce, while simultaneously increasing the price target from EUR68.00 to EUR73.00. Withagen’s decision aligns with InvestingPro data showing the stock trading near its 52-week high of $88.39, with a P/E ratio of 27.06x. The stock’s technical indicators and current valuation suggest an overvalued position, supporting Withagen’s view that the valuation multiples have extended to the upper end of their historical range, suggesting an unsustainable premium compared to the broader food and beverage sector.
According to Withagen, the new price target implies an approximate 12% downside risk for CCEP shares. The company’s return on invested capital stands at 9%, while maintaining a strong market position with revenue of $21.2 billion in the last twelve months. Despite these metrics and the resilience of soft drinks, effective management, and strong alignment within the Coca-Cola system driving valuation multiples higher, InvestingPro analysis indicates the stock is trading in overbought territory.Want to make more informed investment decisions? InvestingPro subscribers have access to 10 additional exclusive ProTips and comprehensive financial analysis for CCEP, including detailed Fair Value calculations and health scores.
Withagen explained his rationale behind the downgrade, stating that while CCEP has seen certain positive developments, the resulting higher multiples may not be sustainable in the long run. The analyst’s assessment is based on a valuation call, as the shares are currently trading at what he considers to be an inflated level relative to the industry.
CCEP, as a major bottler and distributor within the Coca-Cola system, has been recognized for its operational execution and the inherent stability in the soft drink category. Despite these strengths, Kepler Cheuvreux’s analysis suggests caution due to the current stock valuation, prompting the downgrade in the stock rating to Reduce.
In other recent news, Coca-Cola Europacific Partners (CCEP) reported its full-year 2024 financial results, revealing a revenue of €20.7 billion, marking a 3.5% increase from the previous year. The company also saw an 8% rise in operating profit, reaching €2.7 billion, despite a slight revenue miss in the fourth quarter. Additionally, CCEP announced a €1 billion share buyback program to be executed over the next twelve months, which is expected to be positively received by investors. Analyst firm Bernstein maintained a Market Perform rating on CCEP, with a price target of $82.00, noting that while the company missed its volume targets, it largely met expectations in other areas. The full-year 2024 diluted earnings per share (EPS) was reported at €3.95, aligning closely with both Bernstein’s and the consensus estimates. CCEP’s performance varied across regions, with Europe experiencing a volume decline, while the Asia Pacific segment saw growth. Furthermore, the company has been gaining market share in more than half of its major markets, bolstered by its strategic initiatives and strong overall performance.
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