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Bull of the Day: SodaStream (SODA)

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SodaStream International Limited (SODA - Free Report) is gaining momentum as health and wellness trends have boosted sales of its sparkling water system. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by the double digits in 2017.

SodaStream makes and distributes home beverage carbonation systems called Sparkling Water Makers. These allow consumers to turn tap water into sparkling water and flavored sparkling water. Products are available at more than 80,000 retail stores in 45 countries.

Natural Unsweetened Essences Launches in Stores

On Nov 20, SodaStream announced that it was launching its premier flavor essences, Fruit Drops, in stores after the entire line of natural unsweetened essences sold out online in just 2 weeks.

They are all-natural flavored, preservative-free and contain zero calories.

It comes in 5 flavors at retailers: Lemon, Lime, Raspberry, Orange and Mango.

The response to this product is in line with consumer demand for natural products, which has been steadily rising.

But can it keep the momentum?

SodaStream Beats Again in the Third Quarter

On Nov 1, SodaStream reported its third quarter fiscal 2017 results and, once again, beat the Zacks Consensus.

It was the 9th earnings beat in a row.

Earnings were $0.87 versus the Zacks Consensus of $0.74.

Revenue jumped 13% to $139.8 million from $124.2 million in the third quarter of 2016.

It saw record profitability in the quarter along with gross margin expansion. The increase in gas refill units was an all-time record of 8.4 million in the third quarter.

SodaStream saw strong growth across most of its geographic segments with revenue jumping 34% in Asia-Pacific and 13.5% in Western Europe. However, it lagged in the Americas, rising just 1.2%.

Western Europe is still its largest geography, as a percentage of total revenue, at 60.6% in the third quarter. Asia-Pacific, by contrast, accounted for just 12.4% with the Americas at 21.6%.

Raised Full Year Guidance

Given the solid performance in the quarter, the company slightly raised its full year 2017 guidance. Revenue is now expected to rise 13% to $536 million, up from $476.1 million in 2016.

Earnings are expected to be $2.90, up about 40% from the $2.07 it earned in 2016.

As a result, the analysts have tweaked their estimates to get them in line with the guidance.

The 2017 Zacks Consensus has risen to $2.96 from $2.77 since the earnings report. That's 6 cents higher than the guidance but given the earnings beat track record, analysts clearly feel confident about going above the company's guidance level.

That's earnings growth 42% compared to 2016.

However, analysts are more cautious about 2018. While those estimates have risen over the past 2 months as well, jumping to $3.24 from $2.92, that's just 9.6% earnings growth for next year.

Shares Near Multi-Year Highs

SodaStream's shares were left for dead in 2016 but have come storming back. They're up 75% in 2017 and are trying to retrace back to their 5 year highs.

Here's the 2 year chart.



It's no longer cheap, as it was earlier in the year, as it now trades with a forward P/E of 23.5.

But for investors looking for a way to play the wellness trend, SodaStream is one to keep on your shortlist.

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