CNBC Stock Blog

ABOUT THE CNBC STOCK BLOG

The CNBC Stock Blog is a cross-section of expert opinions and insights from our TV and Web site coverage. This blog includes posts written by and about top analysts and strategists, super-investors and CNBC's own market mavens. You'll find stock picks, news about publicly-traded companies, commodities, hot sectors, ETFs and the latest options action.

STOCKS

» More

MARKET MOVERS

» More

RSS FEED

» Help

Subscribe to this RSS feed
Stay up to date with the CNBC Stock Blog.

CNBC EXPLAINS

Coke's Deal Is Good for Investors: Equity Analyst

Published: Thursday, 25 Feb 2010 | 10:37 AM ET

Text Size

By: JeeYeon Park
CNBC.com Writer

Coca-Cola announced plans to buy the North American operations of its largest bottler, Coca-Cola Enterprises [CCE Loading... () ], in a deal that would cut costs and increase flexibility in its distribution. What does the move mean for investors? David Silver, equity research analyst at Wall Street Strategies, shared his insights.

“This move is a complete 180 from even back at the analysts’ conference a few months ago, and even on the fourth-quarter conference call,” Silver told CNBC.

Coke's announcement comes just as rival PepsiCo [PEP Loading... () ] is about to close its own purchase of its largest bottlers, Pepsi Bottling Group [PBG Loading... () ] and PepsiAmericas [PAS Loading... () ].

Coke [KO Loading... () ] said it expected to generate cost savings of $350 million over four years and that the transactions, which are essentially cashless, should add to earnings by 2012.

“They’re going to be able to ship these directly to warehouses instead of going through the bottlers, which then has to go straight to the retailers,” Silver said. “So that’s where they’re going to be able to save not only the fuel cost, but distribution cost.”

In the short run, Silver said Coke’s move may even lower costs for consumers.

“I don’t think you’re going to see too much price-cutting, but it should help out Coca-Cola’s bottomline, specifically in the bottling area,” he said. “And if this model does works, Coke will be a little more active on the bottling front around the world.”