CCEP: Strong Sales Growth on Innovation and In-Market Execution; Shares Remain Overvalued

Narrow-moat Coca-Cola Euro-Pacific Partners posted a strong first-quarter trading update, with volumes up 7.9% and constant-currency revenue up 8.4%. The bottler’s efforts to diversify regional exposure paid off, as double-digit expansion in Asia Pacific (30% of total volume), especially in the newer territories of the Philippines and Indonesia, led comparable volume growth. Meanwhile, volumes remained resilient in Europe (down 1%) despite a soft consumer backdrop and the pruning of low-margin products, including water and Capri-Sun fruit juice. We are maintaining our estimates for mid-single-digit sales compound annual growth rate, and operating margins averaging 14% over the five-year forecast horizon. Our fair value estimates of EUR 56 and $60 remain in place. Shares look overvalued.