The FTSE 100 looks set to get a new stock next year and it’s no minnow. In fact, were it to join the UK’s blue-chip index today, the firm would slip straight into the top 30 due to its considerable size.
The stock in question is Coca-Cola Europacific Partners (LSE: CCEP), which currently has a £27.7bn market-cap. That’s more than the likes of Tesco and Vodafone!
Shares of Coca-Cola Europacific Partners have been on the London Stock Exchange since 2019. Yet I’d say the firm’s still largely unknown by most UK investors.
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So why’s it suddenly set to gatecrash the FTSE 100 from nowhere? And is this a stock I’d consider buying?
Listings shake-up
In July, the Financial Conduct Authority (FCA) rolled out the biggest reform of UK listings rules in decades in a bid to boost London’s stagnating stock market.
One big change was the merging of standard and premium listing segments into a single category. This makes it much easier for companies to become eligible for inclusion in FTSE indexes, which is what’s happened here with Coca-Cola Europacific Partners.
It’s expected to join the Footsie in March 2025.
The share price has performed well, rising 22% year to date and nearly 60% over five years.
What does the company do exactly?
This is the world’s largest Coca-Cola bottler based on revenue. It makes, moves and sells drinks such as Coca-Cola, Fanta, Sprite, and Monster in 31 countries, including the UK, Spain, Australia, and Indonesia.
It’s a significant supplier of beverages to major fast-food chains, including McDonald’s and Yum! Brands (which owns KFC and Pizza Hut).
In total, it serves nearly 600m consumers.
Strong growth and a dividend
The first thing I look for in a potential investment in how fast the company’s been growing. In this case, quite quickly (barring the pandemic).
| 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|
| Revenue | €12bn | €10.6bn | €13.7bn | €17.3bn | €18.3bn |
| Operating profit | €1.55bn | €813m | €1.52bn | €2.08bn | €2.34bn |
The operating margin’s a solid 12.8% and there’s a well-covered dividend. The yield‘s only 2.9%, but the payout’s been growing at a compound annual growth rate of 10.4% since 2019.
Some considerations
In the first nine months of 2024, revenue rose 10.2% to €15.2bn. However, the firm lowered its full-year revenue forecast after a mixed Q3, from 4% to 3.5% growth, though it kept its guidance for 7% growth in operating profit.
It said cash-strapped consumers have started eating at home rather than dining out. This situation could worsen. Also, there was weaker volume performance in Indonesia, a Muslim-majority country, due to consumer boycotts of Western brands over the Middle East conflict.
Another thing is that the stock isn’t particularly cheap. It’s trading on a price-to-earnings (P/E) ratio of 18.5 based on this year’s forecast earnings. That’s a premium to the wider FTSE 100.
My move
Overall, there’s a lot to like here. The company is solidly profitable, with a portfolio of top-tier brands that give it strong pricing power. Analysts are bullish, with 13 out of 19 rating the stock a Strong Buy.
The firm’s markets range from Norway to the Philippines, presenting a good mix of developed and emerging economies.
However, I have one problem. I’ve just invested in another FTSE 100 bottler, namely Coca-Cola HBC, and I don’t want two of them in my portfolio.
If this wasn’t the case though, I’d consider buying some shares.
