How Will SodaStream Earnings Move the Stock?

SodaStream (SODA) will release its quarterly report tomorrow, and the home-carbonation system maker has continued to gain traction in attracting customers and earning retail shelf space. But a big correction in the stock's price in the past couple of months makes it more important than ever for SodaStream earnings to produce the growth that shareholders want to see.

SodaStream has pitched itself as the environmentally friendly answer to soft drinks, as its reusable bottles save frequent trips to supermarkets and also cut down on plastic waste. Yet compared to a home-brewed cup of coffee from a single-serve coffee machine, making homemade soda isn't quite as simple. Will customers stick with the systems long enough to give the company plenty of sales of high-margin consumables like carbon dioxide canisters and soda flavoring? Let's take an early look at what's been happening with SodaStream over the past quarter and what we're likely to see in its quarterly report.

Stats on SodaStream

Source: Yahoo! Finance.

Can SodaStream earnings fizz up further this quarter?
Analysts have looked more favorably in recent months on the prospects for SodaStream earnings, boosting their estimates for the June quarter by $0.02 per share and their full-year 2013 estimates by a nickel per share. The stock has climbed about 9% since late April, but it's down almost 20% in just the past month from much loftier heights.

SodaStream hasn't shied away from setting lofty goals for itself. In mid-May, the stock began its big run higher after the company followed up impressive earnings from the first quarter with its goal of reaching $1 billion in annual sales by 2016. Given the company's 34% revenue growth in the quarter, which also saw sales from CO2 refills and syrup flavoring more than double, SodaStream's target doesn't seem unreachable. Innovative new ideas like its partnership with Whirlpool (WHR -10.98%) to produce a KitchenAid-branded carbonator could help SodaStream achieve new heights more quickly.

Yet one possible exit strategy for SodaStream investors turned out to be a dud. In early June, rumors flew that PepsiCo (PEP 0.18%) would buy SodaStream, but Pepsi categorically denied those rumors. Moreover, the stock lost steam this month as a New York Post report claimed that the company had tried to sell itself but was having difficulty finding a buyer.

The bigger threat, though, might come from Green Mountain Coffee Roasters (GMCR.DL), which filed a patent for a home soda machine. It's possible that the company is merely responding to competitive pressure on the coffee side of its business, but given the success of Green Mountain's home-brew coffee machines, a Keurig-branded soda maker could become a big competitor for shelf space at retail stores.

In the SodaStream earnings report, watch for confirmation that CO2 refill and syrup sales are climbing at a faster pace than the machines themselves. Signs of permanent adoption among customers are much more important than getting the systems out the door at this point in SodaStream's growth cycle.

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