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SodaStream International Ltd.’s (SODA - Snapshot Report) first-quarter 2013 results beat the Zacks Consensus Estimate for both revenues and earnings. Margins were however quite sluggish due to continued marketing investments. Buoyed by the strong results, the company also upped its financial outlook for the full year.

Earnings (including share based payments) of 57 cents per share outpaced the Zacks Consensus Estimate of 54 cents by almost 5.6%. Better-than-expected top line due to strong demand in the U.S. drove earnings almost 19% higher from 48 cents recorded a year ago.

Revenues and Margins

Revenues of $117.6 million increased 33.9% year over year on the back of strong growth in the Americas and Western Europe. Total revenue also beat the Zacks Consensus Estimate of $115 million.

Revenues increased 89% in Americas, 17% in Western Europe and 1% in Central and Eastern Europe, Middle East and Africa but declined 6% in Asia/Pacific.

In the Americas, sales in the U.S. increased 93% driven by the increased demand for both soda makers and consumables (like gas refills and flavors). In the U.S., soda maker sales grew 68% and consumables sales increased 109%. Robust increase in brand awareness resulting from expanded retail presence and strong momentum surrounding the Super Bowl campaign drove sales growth in the U.S. In Western Europe, regions like France, Germany and Nordics were strong. Sales declined in Asia Pacific as strong gains in Australia and Korea were offset by declines in Japan.

Among the products categories, soda maker sales increased 28%, consumables increased 37% and other product sales increased 34%.

Gross margins declined 50 basis points (bps) to 54.5% due to a higher dependence on manufacturing subcontractors. Adjusted operating margin declined 150 bps year over year to 11.6% due to high promotional and advertising expenses which offset tailwinds from better fixed-cost leverage.

Improved 2013 Outlook

Following the solid first-quarter results, SodaStream upped its outlook for the full year 2013.

For 2013, SodaStream expects yearly revenue growth of 27% from $436.3 million in 2012, up from prior expectation of a growth of 25%. Net income is expected to go up by 20% from $43.9 million in 2012, up from its previous guidance of 18%.

Management aims to achieve its targets in 2013 through planned marketing support, product innovation and expanded retail presence with both existing accounts and new channels. Moreover, the company is preparing itself to reap benefits from the upcoming summer selling season in the second quarter.

Based in Israel, SodaStream 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).

SodaStream carries a Zacks Rank #3 Rank (Hold). Solid demand, expanding strategic partnerships, enhanced marketing activities, regular product innovations, accretive acquisitions and successful strategic investments will drive the stock, going forward.

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