Coca-Cola Amatil Ltd (ASX: CCL) is one of the most recognisable and well researched companies on the ASX, yet investors don’t seem to be willing to invest for the long term.
As the bottler of Coca-Cola and associated beverages in the Asia Pacific region, Coca-Cola Amatil has been a portfolio mainstay for conservative investors over many years. This can be at least partially attributed to the great Warren Buffett’s love of the company’s parent and 29% shareholder The Coca Cola Company.
Coca-Cola Amatil was terrifically consistent between 2006 and 2012 but broker interest has peaked during the last 12 months after the company reported a fall in profit and a marked shift in local conditions. Indeed my data provider shows no less than 15 analysts’ estimates of Coca-Cola Amatil’s future earnings, the same as Commonwealth Bank of Australia (ASX: CBA).
Coca-Cola Amatil reported a fall in local margins, a massive restructure of operations, and sizeable drop in profit which has forced the share price to fall 30% this year to new five-year lows. This appears to have enticed more brokers to look at the company as a value play.
Consider the following analyst estimates gathered from my data provider;
- The mean estimate of fair value is $9.05, 3% above the current price
- Revenue is predicted to be flat at $5.1 billion
- Normalised earnings per share are estimated at 52 cents, 22% lower than last year
- Dividend per share is estimated to be 46 cents for the 2014 financial year
At the current price of around $8.75, Coca-Cola Amatil is trading on a forward (end of 2014) price to earnings ratio of 16.8 and a 2014 dividend yield of 5.3%, 75% franked, or 7% gross. In the 2015 financial year these numbers are estimated to change to 15.9 and 7.2% respectively. Coca-Cola Amatil’s long-term average PE ratio is around 17.
Are you missing out?
So the question is, with expectations that Coca-Cola’s management team can turn around the company’s trouble points, are you positioned to benefit from the big 7% yield?
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Motley Fool contributor Andrew Mudie does not own shares in any companies mentioned. You can find Andrew on Twitter @andrewmudie