Central European Distribution: the Toast of Poland

When is it good to be an alcohol importer? It's just fine, when you are one of the biggest ones in Europe. It's also very good, when you own a couple of your own distilleries and are one of the biggest vodka producers in the world.

Central European Distribution Corporation (NASDAQ: CEDC) imports and distributes more than 700 brands of beer, spirits and wines in Poland. Among its imported brands are Diageo (NYSE: DEO) spirits, Metaxa Brandy, Remy Martin Cognac, Sutter Home wines, E&J Gallo wines and Jim Beam bourbon. The firm also makes and distributes various brands of vodka. The company owns two distilleries and operates 16 distribution centers, serving some 39,000 retail outlets.

CEDC pleased investors last week, when it raised its FY07 EPS guidance from $1.50-1.66 to $1.56-1.72 and its FY07 revenue guidance from $1.05-1.10 billion to $1.10-1.15 billion. Analysts had been expecting $1.59 and $1.09 billion. The CEO cited strong underlying growth in core brands and downward pressure on raw spirit pricing for the more optimistic outlook. Management also guided FY08 EPS to $2.00-2.10 ($2.00 consensus) and FY08 revenues to $1.20-1.30 billion ($1.23B consensus).

The stock popped into a bullish "pennant" consolidation pattern on the news. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with two "strong buys", two "buys" and one "hold". Analysts see a 22% growth rate, through the next year. The CEDC Price to Sales ratio (1.54), Price to Book ratio (2.69), Price to Free Cash Flow ratio (32.02) and Sales Growth rate (20.04%) compare favorably with industry, sector and S&P 500 averages.

Institutions own about 63% of the outstanding shares. Over the past 52 weeks, the stock has traded between $21.77 and $38.18. A stop-loss of $33.00 looks good here. Note that the firm is expected to report second quarter results in early August.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

Soource:by Larry Schutts, bloggingstocks.com