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SodaStream (SODA) Raised to Strong Buy: Should You?

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On Nov 15, SodaStream International Ltd. was raised to a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SodaStream recently reported impressive results for the third quarter of 2016, beating the Zacks Consensus Estimate on both counts. The company’s adjusted earnings crushed the Zacks Consensus Estimate by 187.5% and total revenue by 5.5%.

Moreover, the company’s bottom line increased a robust 213.6% on a year-over-year basis. Sales rose 12.9% year over year on higher demand for sparkling water makers and consumables mainly in Germany, Japan, Australia, the Nordics, the U.S. and Canada. The top-line increase was supported by repositioning of the SodaStream brand around sparkling water coupled with effective marketing programs aimed at increasing household penetration.

SODASTREAM INTL Price and Consensus

 

SODASTREAM INTL Price and Consensus | SODASTREAM INTL Quote

SodaStream's earnings before interest, taxes, depreciation, and amortization (EBITDA) also soared 140.6%. Operating income was up 243% year over year, driven by higher operating leverage and gross margin improvement.

Owing to the changing consumer preferences toward more healthy food items, the soda industry has suffered a great deal. Carbonated soft drinks industry behemoths like The Coca-Cola Company (KO - Free Report) and PepsiCo Inc. (PEP - Free Report) have been dealt a heavy blow as well.

After reporting weak sales for quite some time now due to low demand for its products, the company posted strong sales and margins in the first nine months of 2016. SodaStream has re-marketed its soda machines as makers of gourmet sparkling water drinks. The company has also adopted a new motto: "Love Your Water."

SodaStream has ramped up its marketing drive and has also occupied a place on the shelves of popular U.S. supermarket chain Whole Foods Market, Inc. . We believe these initiatives are paying off.

During the third quarter, the company’s home carbonation system was used to produce more sparkling water than any other brand worldwide, which resulted in a quarterly record of 7.7 million gas refills.

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