Don't Blow It Next Week, SodaStream

We're now exactly one week away from SodaStream's (NASDAQ: SODA  ) next quarterly report, and things are finally starting to heat up for the maker of cool drinks.

The same market that has ignored SodaStream's healthy financial performances outside of a short-lived rally two summers ago is starting to pay attention. The shares are up nearly 40% since its previous quarterly report.

It's about time.

SodaStream's fundamentals have been on beast mode since its 2010 IPO. The company behind the popular system that turns still water into sparkling soda has managed to blow through Wall Street's profit targets in each of its first seven quarters as a public company. It hasn't even been close.

 

EPS est.

EPS

Surprise

Q4 2011

$0.29

$0.32

10%

Q1 2012

$0.46

$0.55

20%

Q2 2012

$0.46

$0.52

13%

Q3 2012

$0.72

$0.87

21%

Source: Thomson Reuters.

This is the kind of momentum that should excite investors, but that enthusiasm has either been nonexistent or fleeting in the past. It does feel different this time.

Stepping up to the big boys
Whether it was the record performance across all three product categories during the third quarter or the Super Bowl commercial earlier this month, SodaStream is silencing the skeptics who have argued that home-based soda brewing is a fad.

Growth investors also have to like what they see when they size up SodaStream to cola war behemoths PepsiCo (NYSE: PEP  ) and Coca-Cola (NYSE: KO  ) . SodaStream is calling them out in its ads, and investors may as well call them out in making a valuation argument.

All three companies share similar profit multiples, fetching between 16 and 18 times this year's projected earnings. However, while PepsiCo and Coca-Cola are expected to grow revenue by 4% to 5% and profitability by 7% to 8%, SodaStream is a bubbly speedster. Analysts see the latter growing its revenue by 20% on a 29% bottom-line pop.

Naturally, there are reasons why Coca-Cola and PepsiCo deserve healthy market premiums to their growth rates. They have been reliably consistent for decades. They're blue chips ringing up tens of billions in annual revenue.

However, SodaStream has been too cheap for too long. It's time that the fizz maker got in on the fun.

Wednesday, don't be late
SodaStream sold a record 941,000 soda maker kits, 4.3 million carbonator refills, and 7.7 million syrup bottles during its third quarter. Investors know that SodaStream will deliver big year-over-year results, but they will also be keeping an eye on sequential trends.

You don't want to see carbonators or flavors dip in volume next week, even though there are some seasonal considerations here, given soft drink consumption trending higher during the summer as a refreshment.

Analysts see SodaStream coming through with a profit of $0.38 a share for the quarter, comfortably ahead of the $0.32 a share it posted a year earlier. It should be a welcome break from Wall Street targeting a year-over-year decline in profitability when PepsiCo reports tomorrow.

However, investors will also want to know about new initiatives. SodaStream is rolling out single-serve syrup pods called SodaCaps. It makes the soda-making process more convenient and the pods should provide healthier margins than the traditional flavor bottles. It even showed them off in the Super Bowl commercial.

SodaStream also noted at an investor conference last month that at least one upscale grocer is testing distribution. The company is also working on a platform for refrigerators to dispense carbonated water right from the tap. We may also get updates on how SodaStream's partners are holding up. Kraft Foods introduced its Country Time and Crystal Light brands as SodaStream co-branded syrups last year, and Campbell Soup is hopping on later this year by licensing its V8 Splash and V8 V-Fusion brands for SodaStream.

Yes, there's also the aura of competition. Cuisinart has thrown its hat into this ring, but SodaStream has pointed out how it continues to thrive in European markets after competitors crash the party.

After nearly three years of public trading, SodaStream has arrived. Next week, it will want to remind investors that is has other destinations in mind.

While you're waiting...
Check out The Motley Fool's premium report on SodaStream, which explains the opportunities as well as the risks in the company. The report comes with a year’s worth of updates, so you'll never miss a beat. Just click here to get started.


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Related Tickers

10/1/2014 3:59 PM
SODA $28.01 Down -1.48 -5.02%
SodaStream CAPS Rating: ***
CPB $42.22 Down -0.51 -1.19%
Campbell Soup CAPS Rating: ***
KO $42.74 Up +0.08 +0.19%
Coca-Cola CAPS Rating: ****
KRFT $55.83 Down -0.57 -1.01%
Kraft Foods, Inc. CAPS Rating: ****
PEP $92.65 Down -0.44 -0.47%
PepsiCo CAPS Rating: ****

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