Cott Corp. Down 6% On Q2 Results

Shares in Cott Corp. (COT) fell more than 6% on Thursday after the company reported second quarter results that paled in comparison to last year. The soft drink maker said in a statement that its second quarter volume was 340.3 million eight-ounce equivalent cases, down 6.4% compared to the second quarter of 2006, while revenues in the quarter were C$498.4 million, down slightly from C$502.0 million in the second quarter of the prior fiscal year.

The company also reported that its gross margin dropped year-over-year from 14% to 10%, as did its diluted earnings per share, from C11¢ to C7¢.

"The earnings results are indicative of continued fundamental pressure weighing on North American operations driven by the company's exposure to elevated corn and aluminum spot prices, volume share declines in carbonated soft drinks and limited exposure to growing beverage segments or channels," Goldman Sachs analyst Andrew Sawyer said in a note to clients.

He added that the company's higher-than-expected selling, general and administrative expenses suggest that Cott's cost cutting measures have been slow to take.

He also told clients to expect "significant market skepticism" going forward regarding Cott's claim that it is still on track to meet its full-year operating profit growth target of 12% to 15%. At the halfway point, the company's earnings before income tax is already being down 25% to 30% from the previous year.

As such, Mr. Sawyer has put Cott under review and has a "neutral" rating on the stock.

COT 1-yr chart: