Deutsche Bank's positive outlook on Coca-Cola Europacific Partners (CCEP) has shined a light on what many have overlooked as a great dividend opportunity. Despite tough market conditions, CCEP managed to pull in €5.36 billion in revenue for Q3 2024, showing a solid 2.4% growth.

What’s really interesting is that CCEP recently got approval from the Financial Conduct Authority to transfer its listing category, which could lead to its inclusion in the FTSE UK Index by March 2025. This, combined with strong analyst support, caused Deutsche Bank to set its price target at $90, which points to promising growth ahead.

This all comes at a time when the beverage industry is starting to stabilize after years of economic ups and downs. Numbers from Circana show the food and drink business is picking up steam in 2024, with volumes up 0.8% and prices rising 1.4%, adding up to 2.2% overall growth. 

This matches what experts thought would happen, and it's a welcome change after three years of falling sales. CCEP's success stands out even more when you look at the bigger picture, where the global drink industry is expected to hit $235.70 billion in 2024. 

The company's strategy to expand into different regions is paying off; when European sales declined, their Asia Pacific business filled the gap, showcasing their ability to tackle diverse market challenges. Let's dig into why this company's plans, market position and financial position make it a dividend stock worth buying right now.

The Numbers Behind CCEP’s Success

Coca-Cola Europacific Partners (CCEP) is one of the biggest bottling partners for Coca-Cola (KO), covering a wide range of markets across Europe and the Asia-Pacific region. Their business is all about bottling and distributing Coca-Cola products, and they use their size and global reach to keep growing steadily.

Over the past year, CCEP’s stock has performed well, up 24.6% year-over-year and 13.9% year-to-date. 

CCEP’s third-quarter earnings showed revenue up by 2.4% to €5.4 billion, even though European sales were a bit lower due to weaker demand and bad summer weather. Thankfully, their presence in other regions helped balance things out, as strong sales in the Philippines made up for Europe’s challenges. Energy drinks like Monster saw a 4.5% boost in sales, while Powerade sports drinks grew by 0.7%, proving that CCEP knows how to tap into changing consumer tastes.

CCEP’s valuation stands out compared to its competitors. It trades at a forward price/earnings (P/E) ratio of 18.29, which is slightly higher than the consumer staples sector average of 17.00. However, this reflects the strong brand premium and pricing power CCEP enjoys as part of its relationship with Coke, showing that investors are willing to pay a bit more for CCEP’s growth potential and stability in a tough market.

How CCEP is Poised to Expand Margins and Market Share

CCEP is setting itself up for steady growth. The recent acquisition of Coca-Cola Beverages Philippines, in partnership with Aboitiz Equity Ventures, not only expands CCEP's reach, but also brings in a well-run business that’s immediately boosting earnings. This move strengthens CCEP’s presence in the Asia-Pacific region (now called APS) and opens up new opportunities for efficiency, especially in helping Indonesia’s growth plans.

This fits perfectly with CCEP’s goal of growing through diversification and scale. The CEO recently highlighted how well the company has been doing in 2024, with increases in volume, revenue, and market share. Even with a tough summer in Europe, due to weaker demand and bad weather, CCEP still managed to grow its top line. Their focus on smart pricing, promotions, and offering a wide range of products has helped boost revenue per case. Combined with ongoing cost-saving efforts, this is setting CCEP up for strong cash flow and a solid position heading into 2025.

For investors looking for income, CCEP offers an appealing dividend. With a forward yield of 3.41% and a payout ratio of 57.41%, the company is committed to rewarding shareholders while leaving room for future growth. They’ve just announced a second half interim dividend of €1.23 per share, to be paid in December 2024, bringing the full-year dividend to €1.97 — up 7.1% from last year. Paying dividends twice a year gives investors regular income, and the increase shows CCEP’s financial strength and confidence moving forward.

The Bullish Case for CCEP, According to Analysts

Coca-Cola Europacific Partners (CCEP) is getting a lot of love from analysts, who are all feeling pretty good about its future. The company recently shared its forecast for revenue to grow by about 3.5% this year, thanks to a good mix of higher sales and better pricing. They also foresee operating profit rising around 7%, with finance costs staying steady and a tax rate of about 25%. This solid outlook shows that CCEP is in a strong financial position, aiming to generate at least €1.7 billion in free cash flow.

Analysts are really backing CCEP, with an overall “strong buy” rating from the 11 experts in coverage. The average price target for the stock is $84.61, which means it could rise 11.3% from its current price. 

Deutsche Bank recently upgraded CCEP to "Buy" and raised its price target from $78 to $90, citing the company’s ability to improve margins even with inflation and flat sales in some areas. Analyst Mitch Collett noted that this shows how efficient and strategic CCEP is.

Other analysts are on board, too. Barclays bumped its price target for CCEP from $84 to $86 while keeping an "Overweight" rating, praising the strong demand and competitive edge in the Australia, Pacific & Southeast Asia (APAC) region. CFRA even raised its target from $77 to $82, recognizing steady growth, but maintained its outlier “Hold” rating on CCEP, noting a lack of immediate catalysts. 

Overall, it’s clear that analysts see great potential in CCEP moving forward.

Conclusion

CCEP isn't just another beverage stock; it's a strategic powerhouse quietly delivering impressive returns. With a robust geographic footprint, smart acquisitions, and a dividend that's growing faster than most staple stocks, this Coca-Cola bottling partner offers investors a compelling blend of income and growth potential. Backed by near-unanimous analyst support, CCEP represents a unique opportunity for those looking to add a resilient, cash-generating stock to their portfolio.