How To Play Sodastream And Keurig During Earnings

Keurig Green Mountain IncGMCR

is scheduled to report its third quarter results on Wednesday after market close. The

(based on 31 estimates) is looking for the company to earn $0.82 per share on revenue of $1.044 billion. This compares to the Wall Street consensus estimate looking for the company to earn $0.79 per share on revenue of $1.035 billion.

Sodastream International LtdSODA

is scheduled to report its second quarter results on Wednesday after market close. The

Estimize community

is looking for the company to earn $0.35 per share on revenue of $104.73 million. The Wall Street's consensus estimate is more aggressive, looking for the company to earn $0.37 per share on revenue of $107.80 million. Here are what some of Wall Street's top analysts are saying ahead of the print.

Keurig Green Mountain
KeyBanc: Market Reaction To Issues ‘Overdone' Akshay Jagdale of KeyBanc commented in a note on July 20 that Keurig's "execution" and ability to manage market expectations has "disappointed" as of late, although the company is beginning to show improving metrics. As an example, for the six month period ending in March, brewer shipments were down 14 percent year over year while sales were down 19 percent. However, the analyst's most recent checks suggest "flattish" volume growth trends due to lower price points, improved online reviews, and the introduction of the K200 and K250 series brewers. "Taken together, although still relatively early days, we believe brewer sales have likely turned a corner following the disappointing holiday season, which bodes well for future installed base growth," Jagdale wrote. Jagdale also noted that K-Cup category sales "accelerated slightly" over the last three months and are now growing at a near 20 percent clip. The analyst continued that measured channels represent 55 percent of the total K-Cup category, and the 20 percent growth rate implies that measured channels are growing in the mid single-digit range. This also implies an overall category growth rate of around 13 percent – a level that is higher than investors are expecting. Shares were maintained with an Overweight rating with a price target lowered to $120 from a previous $175. Wedbush: Top-Line Pressure To Continue Phil Terpolilli of Wedbush commented in a note on July 13 that his price checks at major retailers found the most significant price changes occurred in Keurig-owned brands which were up low-double-digits year over year and "slightly ahead" of the approximate nine percent announced price increase by the company last year. Terpolilli continued at the low-end price point, the spread between Keurig's brands and private label cups widened and at the high-end price point, the gap between Keurig's brands and premium packs narrowed. As such, the analyst suggested that Keurig is "likely" to continue facing increased top-line pressure from a negative sales mix. However, Terpolilli estimated that every five percent move in unhedged coffee costs results in approximately $0.15 in earnings power for the coffee. Given the fact that coffee prices have dipped 15 percent to 25 percent on average over the last few months, the company could benefit in the $0.15 to $0.20 range even with reinvestment in pricing and other areas. "On the one hand, continued pullback in increasingly out-of-favor GMCR shares is beginning to look overdone in light of the improving coffee cost outlook and ongoing adoption (albeit slowing) of single-serve coffee," Terpolilli wrote. "However, with concerns around Keurig Kold, operating cost spending, and successful entrance of unlicensed competitors into 2.0, we believe the company is unlikely to experience a meaningful earnings growth reacceleration and therefore deserves its current discount to historical averages." Shares were maintained with a Neutral rating with a price target lowered to $85 from a previous $100.

SodaStream

Roth Capital: Transition Underway

Anton Brenner of Roth Capital commented in a note on July 28 that SodaStream's transition from a "soda company" to a "health and wellness" focused company is underway with a complete lineup of soda makers (The Source and The Splash) and flavors being introduced while older, out-dated models are being discontinued. With that said, Brenner is expecting SodaStream's second quarter results to "decline sharply," reflecting "significantly" lower U.S. sell-in comparisons as a rebound is only expected to begin in the bottom half of the year. Specifically, the analyst is looking for the company to earn $0.32 per share in the quarter on revenue of $105 million. Brenner added that the fourth quarter will be SodaStream's first "meaningful" indication of "consumer acceptance" of the new product line, against a weak year-earlier revenue comparison of negative 25 percent. Bottom line, Brenner suggested "we would be especially aggressive" on the stock if the company reports a weak second quarter. Shares were maintained with a Buy rating with an unchanged $29 price target.

Susquehanna: Chat with Management Reaffirms Positive Direction

Pablo Zuanic of Susquehanna Financial Group commented in a note on July 7 that a recent chat with SodaStream's CEO Daniel Birnbaum and CFO Daniel Erdreich revealed the U.S. relaunch is "on track" with new products set to hit the shelf beginning in late July with a global rollout of new products completed by the first quarter 2016. Zuanic also noted that management said it plans on launching a hot/cold system by the second half of 2016 and could partner with another company in doing so. "SodaStream's apparent technological edge should make it an attractive acquisition target to various appliance and beverage players, in our view," Zuanic wrote. "We rate SodaStream Positive on what we think is an attractive valuation, not reflecting the current state of the business, the turnaround upside, and M&A optionality. We would make use of the recent weakness in the stock." Shares were maintained with a Positive rating with an unchanged $27 price target.

JPMorgan: Q1 Commentary

John Faucher of JPMorgan commented in a note in early May following SodaStream's first quarter print that it still has a "long road ahead" towards a rebound in its business. SodaStream earned $0.40 in its first quarter, well ahead of Faucher's $0.03 estimate. However, the top line print fell 22.7 percent, slightly weaker than his 20.8 percent forecast. The Americas top line fell 34.4 percent, Western Europe fell 12.7 percent, Asia-Pacific sales fell 24.7 percent while CEMEA sales fell 44.8 percent. Total maker unit sales fell 14 percent year over year, total flavor units fell 41 percent while CO2 refills actually increased four percent year over year. Looking forward, Faucher suggested that 2015 will continue being a "tough" year from a revenue and profit standpoint for SodaStream, resulting in a volatile stock over the next few quarters. However, if the company can improve the long-term profitability of its US operations, a valuation of the stock could "point to value" even though "visibility is poor." Shares were maintained with a Neutral rating with an unchanged $19 price target.

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