SodaStream (SODA) continues to execute on the mother of all second acts. The company behind the carbonated beverage maker saw its shares rise 9.2% last week, moving higher after another better-than-expected quarter and an analyst upgrade. SodaStream seemed left for dead a couple of years ago when shifting soft drink consumption trends and the faddish nature of its product resulted in back-to-back years of declining sales, but there's been new life injected into the company and the stock with its marketing reinvention as a maker of flavored sparkling water.
Investors have been rewarded with fizzy gains. SodaStream soared 142% last year. It's also handily beating the market in 2017, up 58% year to date. SodaStream shares have nearly quadrupled since the start of last year, up 281% in that time.
Image source: SodaStream.
Bubbles rise to the top
Revenue climbed 9.6% To $130.6 million in SodaStream's second quarter. It snaps a streak of five consecutive periods of double-digit top-line growth, but you won't see too many investors smarting with the stock trading at its highest levels since late 2013. Wall Street pros were settling for just $128.7 million in revenue.
Earnings soared 84% to $0.64 a share. It was also a beat on the bottom line, but that's not much of a surprise anymore. Analysts continue to underestimate the profit-generating power of this turnaround story, and it hasn't even been close in this heady year-and-a-half run in which the stock has nearly quadrupled.
| Quarter | EPS Estimate | Actual | Surprise |
|---|---|---|---|
| Q1 2016 | $0.11 | $0.29 | 164% |
| Q2 2016 | $0.21 | $0.37 | 76% |
| Q3 2016 | $0.23 | $0.69 | 200% |
| Q4 2016 | $0.36 | $0.71 | 97% |
| Q1 2017 | $0.43 | $0.66 | 54% |
| Q2 2017 | $0.53 | $0.64 | 21% |
Data source: Yahoo! Finance. EPS = earnings per share.
There's no denying that forcing Wall Street pros to perpetually jack up their targets has been beneficial to SodaStream stock. Analysts were only holding out for 7% revenue growth in 2017, and now they're eyeing a 10% uptick. The boosts have been even more dramatic on the bottom line.
SodaStream is hitting on nearly all cylinders. There was growth in all territories beyond a flat showing in Asia-Pacific sales. It sold 859,000 starter kits during the quarter, 35% ahead of the prior year's showing -- but, more importantly, a good indication that the product's popularity continues to grow. Carbonator refills rose 10%, hitting another all-time high. It's been testing and expanding its platform that offers free home delivery of the CO2 canisters. Soda flavors is the only category to be negative, but that's not a surprise as folks turn to other means to sweeten their sparkling water. The 84% surge in SodaStream's profitability shows how little the sale of once high-margin flavors matter to the reborn pop star these days. With new products on the way and its global market penetration growing to 11.6 million homes, it's hard to deny the near-term momentum. SodaStream is more fizz than flat with the stock chart to prove it.
