Beverage maker Cott
The company's stock has been rocked by its announcement that current-year earnings are going to be "substantially below previously announced guidance." How low has the limbo bar been lowered? The company didn't provide revised guidance.
Lowered guidance is nothing new for Cott. The company warned lower last year, citing rising raw material costs. So what's the excuse this time? You guessed it -- rising raw material costs, continued softness in the U.S. carbonated soft drink business, and a product mix shift to lower-margin bottled water.
Cott is the world's largest producer of retailer-branded soft drinks. Customers include Wal-Mart
Investors might want to take Cott's warnings and look at brand-name peers like Motley Fool Inside Value pick Coca-Cola
As consumers get squeezed by higher oil prices, soft sales expectations for relatively cheaper generic drinks like the ones Cott's makes indicates a fairly simple truism, to me: Soft drinks of any kind are discretionary purchases. We'd do well to remember that there's always tap water, the ever-cheaper alternative, waiting to steal sales.
Cott has been expected to grow earnings 12.1% annually for the next five years. If it does so and reaches analysts' 2006 earnings estimates of $1.25, the stock, currently at a new 52-week low, is what I'd call bargain priced. For this observer, though, the sales concentration at Wal-Mart is a big negative, as is the softness in U.S. sales.