Coca-Cola HBC: A low-profile bargain

It's not widely reported on, but progress at the inconspicuous blue-chip is something to shout about.

Despite being one of the London market's top 50 stocks, bottling company Coca-Cola HBC (LSE:CCH) rarely gets the coverage it deserves for an impressive five-year record of share price growth.

Today, the unassuming blue-chip was very much in the stock market limelight after its shares powered to the top of the FTSE 100 index risers board with a jump of 8% to 2,569p.

The surge followed a quarterly update in which Coca-Cola HBC highlighted a solid trading performance despite the impact of wet and cold weather on industry volumes in the period.

While the conditions meant it lowered its expectations for full-year revenues growth to between 4% and 4.5%, investors were relieved that the Zug, Switzerland-based company indicated that trading in the current quarter had picked up pace once again.

Analysts at UBS said this updated guidance implied growth of between 5.5% and 7.5% for the final quarter of 2019. UBS is a big fan of the stock, believing that there's a potential upside of 28% to 3,050p from last night's closing price of 2,383p.

Shares spiked above the 3,000p barrier for the first time in the summer, not long after the company rewarded investors for several years of strong performance with the payment of a 730 million euro (£626 million) special dividend. Shares have subsequently fallen back as wetter conditions have triggered a run of weak reporting by companies with similar exposure. 

Source: TradingView Past performance is not a guide to future performance

The sell-off has been a rare hiccup for a stock that's still risen more than 138% since the start of 2015. Having joined the London market and the FTSE 100 Index in 2013, the company is now among the top 50 biggest stocks with a valuation of over £8.5 billion.

UBS said the recent weakness had left Coca-Cola HBC with a 2020 price/earnings multiple of 17.2x, which at a 21.1% discount to the European consumer staples sector was attractive given the company's capability to "deliver top-quartile growth in Q4 and 2020".

Credit Suisse, which has a price target of 3,000p, added that this discount to the wider sector was now at its widest since 2012. 

The potential for a re-rating comes after the company said it had gained or maintained share in the majority of its markets in the third quarter. CEO Zoran Bogdanovic added he was confident that 2019 will show a year of "solid top-line growth and good margin expansion".

The group has existed in its current form since 2000, when the Hellenic Bottling Company acquired Coca-Cola Beverages. As a partner of Coca-Cola Company, it bottles, sells and distributes the world's most recognised soft drink along with Coca Cola Light, Sprite, Fanta and a range of other sparkling, juice and energy drinks.

Selling more than 2 billion unit cases every year, the company has operations in 28 countries including Ireland, Russia and Nigeria.