SodaStream Should Be Soaring Right Now

You get the feeling that whatever SodaStream (SODA +0.00%) does, it will never be good enough for Wall Street.

Shares of the company behind the namesake beverage system that turns still water into sparkling soda opened slightly lower this morning despite posting blowout financial results.

Revenue growth accelerated during the holiday quarter, soaring 55% to $132.9 million. Adjusted net income clocked in at $0.45 a share. Analysts were only targeting a profit of $0.39 a share on $121.5 million.

SodaStream leaving analyst projections in the dust isn't new. The Israeli-based company has consistently trounced bottom-line expectations since going public three years ago. It wasn't even close in 2012, as SodaStream beat Wall Street targets by double-digit percentage margins every time out.

Source: Thomson Reuters.

SodaStream sold 1.1 million starter kits, breaking the million mark for the first time. SodaStream's previous record was the 941,000 soda makers it sold during the third quarter. The 4.3 million CO2 refills matched the third quarter's tally while the 7.4 million soda flavors sold lagged the record 7.7 million from the third quarter.

The sequential stagnancy on the carbonators and outright decline on the syrup bottles aren't problematic. This is a seasonally slow period for soda consumption given the company's stronghold in Europe and North America, where refreshing soft drinks aren't as compelling in cool weather. The soda makers likely sold briskly as holiday gifts, and the real payoff here will come later this year as the weather starts to heat up and SodaStream owners start getting "busy with the fizzy" again.

The coast is clear for 2013
Naturally one would then gravitate toward SodaStream's outlook as the root of the market's uninspired reaction, but there's nothing alarming there, either.

SodaStream is initiating guidance for the year ahead by targeting revenue and adjusted earnings to climb 25% in 2013. This may seem to be a mixed showing when assessing Wall Street expectations for revenue to climb 20% to $510.2 million with profitability soaring 28% to $2.74 a share, but those percentages are based on 2012 forecast results that are now obsolete.

Applying 25% to SodaStream's actual 2012 results would result in adjusted earnings of $2.99 a share on $545.4 million in revenue. OK, the bottom-line figure will be slightly lower given the likelihood of the share count moving higher, but it's still going to force analysts to push their projections higher. Some financial reports this morning calling the guidance weak simply forgot to do the math.

If you want to make Mr. Market look even sillier, go back a year. SodaStream's guidance then was for revenue to climb just 28% in 2012. Revenue actually wound up soaring 51% last year. In other words, SodaStream's guidance has historically proven to be very conservative.

Pop life
SodaStream is now trading at just 17 times this new year's profit guidance. That's the same multiple as PepsiCo, and Coca-Cola is fetching 18 times this year's bottom-line forecast. SodaStream is no blue chip, but it's also growing substantially faster than these stodgy beverage giants.

Despite the market's reaction to today's strong performance, SodaStream is starting to woo investors. The stock moved 37% higher last year, and it was up 17% as of yesterday's close in 2013.

SodaStream is becoming a global player after decades of growth in Europe. Earlier this month it broke through with its first Super Bowl commercial, willing to pay up to share the promotional stage with Coke and Pepsi ads.

There are also plenty of things to get excited about in 2013. At an investor conference last month, SodaStream hinted at a partnership with an appliance maker for a refrigerator that could dispense sparkling water via SodaStream carbonators. Last week it announced that Samsung would be putting out that fridge.

We also have single-serve syrup pods -- SodaCaps -- that simplify the flavoring process. These capsules will naturally lead investors to compare SodaStream to Green Mountain Coffee Roasters with its K-Cups, again. It's not a fair comparison to either company, especially given the seasonal variances in usage, but it's probably not a bad thing for SodaStream to be hog-tied to the Keurig company now that Green Mountain's shares have nearly tripled since bottoming out this past summer.

SodaStream is also testing supermarket distribution, and Campbell Soup (CPB 0.55%) will become the latest SodaStream partner after a licensing deal that will see V8 Splash and V8 V-Fusion brands pop up as SodaStream flavors later this year.

The market has a lame history of missing the point after some of SodaStream's blowout quarters. Drink up, Wall Street. Mr. Market has it wrong again