Is it time to DUMP your Coca-Cola Amatil Ltd shares?

The Coca-Cola Amatil Ltd (ASX: CCL) share price plunged more than 10% last Friday following yet another profit downgrade. The company is down again today.

CCL Share Price


Source: Google Finance

While Friday’s falls came as a surprise to some investors, Coca-Cola Amatil shareholders have endured a number of setbacks over recent years, leading to significant underperformance of the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), as can be seen above. 

The catalyst behind Friday’s share price fall was a trading update provided by the company, in which it said its Australian Beverages business had performed below last year’s result. Coca-Cola Amatil bottles and distributes Coca-Cola products and Beam alcoholic beverages under license in Australia. It also distributes Coca-Cola products to Indonesia and a handful of island nations.

Has Coca-Cola Amatil lost its fizz?

Coca-Cola Amatil blamed the results on, “volume and price pressure due to competition and category trends.” In English, that means it is being squeezed by other players that want a slice of the consumer sales pie.

Pepsi is Coca-Cola’s number-one competitor globally, while competition between Woolworths Limited (ASX: WOW), Coles – owned by Wesfarmers Ltd (ASX: WES) – and Aldi doesn’t help in-store sales revenue.

Together with a structural change from the increasingly ‘health conscious consumer’, some commentators and analysts are growing concerned about the company’s growth prospects.

Should you buy, hold or sell Coca-Cola Amatil shares?

In the wake of last week’s profit downgrade, analysts have moved to downgrade Coca-Cola Amatil shares. According to The Wall Street Journal, none of the 14 analysts covering the company rate its shares as a buy. A total of 10 analysts have a hold rating while four analysts rate it a sell or underweight.

Frankly, I agree with the consensus of analysts. While the company has appealing features, I do not expect Coca-Cola Amatil shares to outperform the market over the next five years. I think there are many better ideas (see below). 

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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