Coca-Cola Europacific Partners: A Buy Opportunity Amid Undervaluation and Strategic Growth Catalysts

In a market often fixated on short-term volatility, Coca-Cola Europacific Partners (AMS:CCEP) stands out as a compelling long-term investment. Despite recent macroeconomic headwinds and sector-wide skepticism, CCEP's H1 2025 results reveal a company with robust earnings growth, disciplined margin expansion, and a clear roadmap for sustainable value creation. With a forward P/E ratio of just 12.3x (as of August 2025) and a dividend yield of 3.8%, CCEP appears significantly undervalued relative to its fundamentals and growth trajectory.

Financial Performance: Strong Earnings and Margin Resilience

CCEP's H1 2025 results underscore its operational strength. Revenue grew 4.5% year-on-year to €10.27 billion, with adjusted comparable revenue up 2.5% despite FX headwinds. Operating profit surged 19.4% to €1.36 billion, driven by a 3.8% increase in revenue per unit case (UC) and cost discipline. The company's adjusted operating margin expanded to 13.5%, up from 12.7% in H1 2024, reflecting effective pricing strategies and productivity gains.

The APS segment, which includes the Philippines, delivered standout performance. Revenue per UC rose 3.2%, with operating profit up 7.3% to €337 million. Even in challenging markets like Indonesia, CCEP's focus on premiumization and innovation (e.g., Coca-Cola Zero Sugar) mitigated volume declines. Meanwhile, Europe's operating margin hit 14.3%, bolstered by price increases in France and the UK.

Long-Term Catalysts: Philippines Acquisition and SAP Integration

CCEP's 2024 acquisition of Coca-Cola Beverages Philippines, Inc. (now rebranded as Coca-Cola Europacific Aboitiz Philippines, or CCEAP) is a cornerstone of its growth strategy. The joint venture with Aboitiz Equity Ventures (AEV) has expanded CCEP's footprint into a market of 110 million consumers, with a young, urbanizing population and rising demand for low-sugar beverages. CCEAP now distributes iconic brands like Coke and Royal, leveraging CCEP's global expertise and AEV's local insights.

Equally transformative is CCEP's SAP investment, part of a broader €1 billion digital transformation plan. By integrating AI-driven tools like myccep.com and RED One, the company is optimizing pricing, promotions, and distribution. These technologies are projected to unlock €200 million in annual cost savings by 2026, further widening margins. Analysts estimate that SAP-driven efficiency gains could add 150-200 basis points to operating margins over the next three years.

Sustainability and Shareholder Returns: A Dual Engine for Value

CCEP's commitment to sustainability is not just ethical—it's strategic. The company reduced greenhouse gas emissions by 13.6% since 2019 and now uses 46% recycled PET (rPET) in packaging. These initiatives align with ESG-driven investor preferences and reduce regulatory risks. Recognition on the Carbon Disclosure Project's A list and Sustainalytics' ESG top-rated list underscores its leadership in this space.

Shareholder returns are equally compelling. CCEP's €1 billion buyback program has already repurchased €460 million of shares, with a 50% dividend payout ratio based on comparable EPS. At current valuations, the stock offers a 3.8% yield, significantly above the S&P Global Beverage Index's 2.1% average.

Why Now Is the Time to Buy

Despite these strengths, CCEP trades at a discount to its intrinsic value. The market's pessimism—driven by short-term FX volatility and sector-wide ESG skepticism—fails to account for the company's structural advantages:
1. Margin Expansion: SAP integration and pricing power will drive operating margins to 15%+ by 2026.
2. Geographic Diversification: The Philippines acquisition diversifies revenue streams and taps into a high-growth market.
3. Dividend Safety: A 50% payout ratio ensures sustainable returns, even in downturns.

Conclusion: A Buy for the Disciplined Investor

Coca-Cola Europacific Partners is a rare combination of defensive cash flow and offensive growth. Its earnings resilience, margin discipline, and strategic investments position it to outperform in both stable and volatile markets. At current prices, CCEP offers a compelling risk-reward profile for investors seeking exposure to a global beverage leader with a clear path to value creation.

Investment Thesis: Buy CCEP at €52/share, with a 12-month price target of €60/share (25% upside) and a long-term EPS growth estimate of 7-9%.