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SodaStream International Ltd.’s (SODA - Snapshot Report) better-than-expected third quarter results marked yet another robust quarterly performance for this leading soda maker. The company’s earnings have now outperformed the Zacks Consensus Estimate for eight consecutive quarters. Buoyed by the strong results, the company also upped its financial outlook for the full year.

Adjusted earnings of 80 cents per share outpaced the Zacks Consensus Estimate of 68 cents by 17.7%. Solid top-line growth also drove the earnings 66.7% higher from 48 cents recorded a year ago.

Revenue and Margins

Revenue of $112.5 million increased 48.7% year over year on the back of strong performance of both the product categories (soda makers and consumables) and all the four geographic regions. Total revenue also beat the Zacks Consensus Estimate of $102 million.

Revenue increased 61% in Americas, 33% in Western Europe, 37% in Central and Eastern Europe, Middle East, Africa and 145% in Asia/Pacific. Among the products categories, soda maker sales increased 21% year over year with a significant gain in the U.S.

Gross margins improved 70 basis points (bps) due to increase in revenue from direct distribution and better fixed cost leverage. Operating margin improved 160 bps year over year driven by better gross margins and lower general and administrative expenses, which partially offset the rise in marketing costs.

Improved Outlook

Following the solid third quarter results, SodaStream is confident about the next quarter and thus upped its outlook for the full year.

For 2012, SodaStream expects yearly revenue growth of 46%, up from prior expectation of a growth of 40%. Net income is expected to go up by 59%, up from its previous guidance of 55%. For the fourth quarter, the company expects demand to be stronger than expected.

Our Recommendation

Though SodaStream carries a Zacks #3 Rank (short term ‘Hold’ rating), it has bright prospects going forward. Solid demand, expanding strategic partnerships like with Kraft Foods Group, Inc. (KRFT - Analyst Report), enhanced marketing activities, regular product innovations, accretive acquisitions and successful strategic investments will drive the stock going forward. We cannot rule out a Zacks Rank upgrade for this stock in the near term.

Based in Israel, Soda Stream commands a global leadership position in home beverage carbonation market. These soda making systems, sold mainly under the SodaStream brand name, offer a healthier way to enjoy carbonated beverages at home. SodaStream’s products are primarily sold at huge retail stores like Kohl’s, Corp. (KSS - Analyst Report), Macy’s, Inc. (M - Analyst Report), Bed Bath & Beyond, Inc. (BBBY - Analyst Report).

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