SodaStream Int'l (SODA): Zacks Rank Buy
SodaStream International Ltd. (SODA) has topped earnings estimates for 8 straight quarters, and is expected to report another solid performance late next month. Given solid fundamentals, innovative products and a potential long-term earnings growth rate of 30.4%, this Zacks #1 Rank (Strong Buy) manufacturer of soda making systems turns out to be a solid momentum pick.
Strong Upcoming Year Expected
SodaStream, which is scheduled to report its fourth quarter and full year 2012 results on Feb 28, raised its guidance after reporting solid third quarter results in November. It is confident of reporting strong results in the quarter as well.
For 2012, SodaStream expects revenue growth of 46%, up from the prior expectation for an increase of 40%. Net income is expected to increase 59% year over year, compared to the earlier guidance for growth of 55%.
The Zacks Consensus Estimate for the fourth quarter stands at 38 cents per share, up 44.5% from the prior year quarter. For 2012, the Zacks Consensus Estimate is $2.11 per share, up 57.3% from the previous year.
We believe the stock will be driven forward by solid demand, strategic partnerships like that with Kraft Foods Group, Inc. (KRFT), enhanced marketing techniques, product innovations, accretive acquisitions and successful strategic investments.
Solid Third Quarter Results
On Nov 7, the company reported solid third quarter 2012 earnings of 80 cents per share, which beat the Zacks Consensus Estimate by 17.7% and last year's result by 66.7%.
Revenue of $112.5 million increased 48.7% year over year on the back of strong performances in both of the product categories (soda makers and consumables) and in all four geographic regions. Total revenue also beat the Zacks Consensus Estimate of $102 million. Gross margins improved 70 basis points (bps) while operating margin improved 160 bps year over year.
Earnings Estimates Improving
Over the past 60 days, the Zacks Consensus Estimate for 2012 has advanced 0.5% to $2.11 per share, reflecting a year-over-year growth rate of 57.3%. The Zacks Consensus Estimate for 2013 is up 1.5% to $2.67 per share over the same timeframe, reflecting year-over-year growth of 26.9%.
Valuation
SodaStream currently trades at a forward P/E of 18.4, a premium of 75% to the peer group average of 10.5. However, the stock appears reasonably priced with a trailing 12-month return on equity (:ROE) of 18.1%, which is above the peer group average of 10.6%. The PEG ratio also comes in at 0.60, a 40% discount to the benchmark of 1 for a fairly priced stock.
Shares of SodaStream have been rising consistently since mid-November and reached a 52-week high of $49.98 on Jan 7, 2013. Moreover, the stock is currently trading above its 50- and 200-day moving averages, which stand at $40.88 and $37.67, respectively. In fact, the stock has been consistently trading above its 50-day and 200-day moving averages since late-Nov 2012. Volume averages roughly 1,002K daily.
Based in Israel, SodaStream commands a global leadership position in the home beverage carbonation market. The soda making systems manufactured by the company enables consumers to easily transform ordinary tap water into carbonated soft drinks and sparkling water instantly. SodaStream's products are sold mainly under the SodaStream brand name at many leading retail stores.
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