For decades, soda stocks such as Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP) have dominated the carbonated drink industry. While these soda giants have created vast distribution networks and bottling enterprises, SodaStream International Ltd. (NASDAQ: SODA) may have the most compelling alternative to the long-enduring, bottled soda products.
SodaStream is an Israeli maker of in-home soda machines. The system includes a soda maker, a CO2 carbonator, a reusable bottle and over 150 flavor options. The consumer fills the bottle with water, adds CO2 to make the bubbles, and then adds syrup concentrate to make the final flavored beverage. The carbonation machines turn ordinary tap water into sparkling water, sparkling teas and sodas.
The cost of SodaStream’s machines start at around $80 and go to about $200 with additional sales of carbonation kits and drink flavors. SodaStream’s products are available on the company’s website and at leading retailers.
SodaStream has an impressive outlook, solid fundamentals and innovative products that are the growth drivers for this stock.
The company’s products are environmentally friendly, cost effective, promote health and wellness, and are customizable and fun to use. In addition, its products offer convenience by eliminating the need to carry bottles home from the supermarket, to store bottles at home or to regularly dispose of empty bottles.
We believe the stock has bright prospects ahead, due to solid demand for its products, strategic partnerships, enhanced marketing techniques, product innovations, accretive acquisitions and successful strategic investments.
Recently, SodaStream signed a licensing agreement with Campbell Soup Co (NYSE: CPB) to add Campbell’s V8 Splash and V8 V-Fusion brands for the SodaStream home beverage carbonation system.
SodaStream has topped earnings estimates for 8 straight quarters and is expected to report another solid performance late next month, owing to strong third-quarter results.
From 2008 to 2011, the firm’s earnings skyrocketed from 4 cents a share to $1.62 a share. Over the same period, sales have more than doubled to $289 million from $139 million.
SodaStream has a market capitalization of $1.03 billion and trades with a price-to-earnings (P/E) ratio of 26. However, SodaStream is a high-growth company that warrants a high P/E, as the company has a current price to growth ratio (PEG) of 0.86 compared to the industry average of 1.38. The potential long-term earnings growth rate for the stock is 30.4 percent.
SodaStream’s third quarter earnings of 80 cents per share beat the Consensus Estimate by 17.7 percent and last year’s result by 66.7 percent. Revenue of $112.5 million also increased 48.7 percent year-over-year on the back of strong performances in both of the product categories (soda makers and consumables) and in all four geographic regions.
SodaStream will report fourth-quarter and full-year 2012 results on Feb. 20, before the market opens. Its quarterly earnings are slated to rise 19 percent to 38 cents a share. Sales are expected at about $121 million, up 41 percent from a year ago.
For all of 2012, the company projects revenue growth of 46 percent for 2012, up from the prior expectation for an increase of 40 percent. Net income is expected to increase 59 percent YoY, compared to the earlier guidance for growth of 55 percent.
First Call analysts’ consensus have projected 2013 earnings per share (EPS) of $2.74, which is 28 percent higher than 2012. For 2014, SodaStream has a consensus EPS of $2.96, an increase of 8 percent from 2013.
SodaStream International, Ltd (NASDAQ: SODA) has a 12-month price target of $60, an increase of 20 percent in the stock price from its current level.
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Greg Pugh, an income-investing expert, publishes a newsletter called Investing for Monthly Income.
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