CEDC - Central European Distribution - growth in earnings supporting prices

Central European Distribution Corp. (CEDC) shares have been rallying on the heels of the company's excellent fourth-quarter and full-year results, reported in February, in which full-year earnings were up more than 38% to $77.1 million. CEDC also recently announced a financial stake in a Russian alcohol importer and distributor, in order to more effectively pursue growth opportunities within the region.

Full Analysis

Central European Distribution Corp. produces and distributes alcoholic beverages in Poland and internationally. It primarily produces and sells Vodka. CEDC produces almost 8.5 million cases of Vodka annually. It sells its products directly end-sellers such as liquor stores, bars and hotels. The company has a market cap. of $2.53 billion, was founded in 1990 and is based in Bala Cynmyd, Pennsylvania.

On Feb 27, CEDC reported very strong fourth-quarter and full-year results. Net sales for the fourth quarter increased 32% to $393.4 million. Operating income for the fourth quarter jumped 47% from the same period last year to $45.6 million.

For the full year, net sales grew 26% to $1.19 billion. Net income in 2007 was also up sharply from last year, growing to $77.1 million from $55.5 million, producing earnings of $1.91 per share.

The company noted that a couple of components contributed to the strong fourth-quarter and full-year results. CEDC experienced accelerating growth in its core brands, was also able to reduce some of its costs due to strategic initiatives, and noted that the strong underlying economic growth in the region has strengthened sales in its premium brands.

On Feb 27, CEDC announced that it was acquiring a 75% stake in Russian importer and distributor of wines and liquor Whitehall Group in an attempt to gain exposure to the what it deems as excellent expansion opportunities within Russia. Whitehall is expected to produce $200 million in revenue in 2008, up 15%-20% from last year. CEDC said it expects this acquisition to add 35 to 45 cents per share to annual earnings.

At the time of the fourth-quarter and full-year results, CEDC affirmed its original 2008 financial projections of $1.30-$1.40 billion in revenue, with earnings of $2.08-$2.18 per share. But since then, the company has raised its forecast, saying it now expects full-year revenue between $1.42 and $1.52 billion, producing earnings $2.25 to $2.40 per share.

Shares of CEDC have been in a bullish mood since bottoming out on Mar 4 at less than $49. Since then, shares have traded above the $62 mark, representing a very nice short-term gain of more than 25%. Shares are CEDC have been steady climbers for a number of years, and with the 52-week high very close at hand, and the growth in earnings supporting prices, this company's stock looks well positioned to continue its trend.

Content Courtesy: Zacks Investment Research

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