A raft of FTSE 100 companies released financial updates this week giving us insight into the impact of the coronavirus on revenues and profits. These include two drinks firms that have been hit by the shutdown of bars and restaurants.
I believe this pullback in their share prices makes both great additions to any investment portfolio right now.
This FTSE 100 company is fizzing again
Coca-Cola HBC AG (LSE:CCH) is a bottling partner of the Coca-Cola Company. It takes the concentrate and then bottles and distributes it to over 600 million customers across 28 countries.
Everyone will be familiar with its main product lines, but the company has a huge portfolio of brands including Schwepps, Costa Coffee, Fanta, and Sprite.
I see Coca-Cola HBC as a great way for UK investors to invest by proxy into a fantastic US company through the FTSE 100 without the foreign exchange risk.
The firm has been steadily increasing revenue, earnings per share, and profit for a number of years. In turn, the dividend has also been growing by around 10% a year. While not the highest at 2.6%, it is well covered, and the company has paid special dividends in the past.
This year will be a little different due to the coronavirus pandemic. In its first-half financials, Coca-Cola HBC announced that pre-tax profit fell to €167m from €261m and revenue declined by around 15%.
The out-of-home channel (restaurants, homes, and cafés) has been predictably hit hard. But the FTSE 100 firm announced that as lockdowns have eased, trade is gradually returning. I see this year as a temporary blip and would buy into a great growth story with the share price still over 25% off its year high.
Raise a toast
Speaking of fantastic brands, FTSE 100 drinks firm Diageo (LSE: DGE) can rival most. The distiller owns a number of premium brands including Johnny Walker, Guinness, Gordons, Captain Morgan, Smirnoff, and Baileys. It also produces beer and own a stake in Moët Hennessy.
This is another company that has been steadily growing revenue, profit, and earnings per share. The dividend is similar to Coca-Cola HBC at 2.7% and the firm is slightly more expensive trading at a price-to-earnings ratio of 23.
The dividend has a fantastic growth record stretching back 20 years. The final dividend was held, meaning the full year dividend edged up 2%.
Its recent financials have been well covered. Declines in revenue and pre-tax profit led to earnings per share plunging by over 50%. In my view this was to be expected given the shutdown of bars and restaurants.
But like Coca-Cola HBC, I see this drop in revenue as temporary and view the near-30% drop in share price as a great entry point for an investment I intend to hold for decades.
My only longer-term concern is that there is a growing trend in established western markets away from a drinking culture.
The company has so far negotiated this well by focussing more on premium brands that are still growing, but this is something to keep an eye on. I see the Chinese and Indian growing middle classes as key to future growth for Diageo.
If I only had to buy one, I would choose Coca-Cola HBC. But I don’t, so both FTSE 100 companies currently make my portfolio.