Will SodaStream (SODA) See Better Sales & Earnings in Q4?
SodaStream International Ltd. SODA is set to report fourth-quarter and full-year 2015 results on Feb 18, before the market opens. Last quarter, the Israel-based manufacturer of household soda makers delivered in-line earnings.
Let’s see how things are shaping up for this announcement.
Factors to Consider
SodaStream has been facing soft sales in the U.S. over the past few quarters due to low demand for its products — soda/sparkling water machines and flavored syrups. The company’s products are primarily sold at major retail stores like Kohl’s, Corp. KSS, Macy’s and Bed Bath & Beyond.
The U.S. carbonated soft drink (CSD) market is facing troubles as consumers are shifting away from traditional soda toward more natural, water-based beverages containing fewer calories.
SodaStream is thus pursuing a global restructuring and growth plan. It is repositioning itself as a water-based brand under the health and wellness plan and making significant changes in its growth strategies to turn around the business.
Per the plan, the company rolled out a range of natural water-enhanced flavors in the U.S. and some international markets in the third quarter. The company is also supporting the launch with marketing campaigns and improved retail execution.
At the third-quarter conference call, management announced that the new water-based flavors were generating decent sell through at the U.S. retailers that have been selling these for more than a month.
Also, the company is working to transform its manufacturing base and operating structure — including the consolidation of production under the new Lehavim facility in Southern Israel — to enhance efficiency.
With new flavors on the shelf and the Lehavim production facility now fully functional, management is optimistic of achieving better sales trends in the fourth quarter and 2016.
Management expects fourth-quarter sales to remain flat sequentially but turn positive in 2016.
Gross margins are projected to decline about 100 basis points in the to-be-reported quarter due to unfavorable mix and currency headwinds. Moreover, sequentially, marketing costs are expected to be slightly higher, while operating profit will be marginally low.
Furthermore, currency headwinds will limit sales growth as many foreign currencies such as euro, Australian dollar and Swedish krona weaken against the U.S. dollar.
Earnings Whispers
Our proven model does not conclusively show that SodaStream is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at 17 cents.
Zacks Rank: SodaStream’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
A couple of stocks in the broader consumer products sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Nutrisystem, Inc. NTRI, with an Earnings ESP of +5.26% and a Zacks Rank #3.
Vista Outdoor Inc. VSTO, with an Earnings ESP of +7.27% and a Zacks Rank #2.
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NUTRI/SYSTEM (NTRI): Free Stock Analysis Report
SODASTREAM INTL (SODA): Free Stock Analysis Report
KOHLS CORP (KSS): Free Stock Analysis Report
VISTA OUTDOOR (VSTO): Free Stock Analysis Report
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