Will SodaStream (SODA) Disappoint This Earnings Season?

SodaStream International Ltd. SODA is set to report second-quarter fiscal 2014 results on Jul 30, before the market opens. Last quarter, the company delivered a positive earnings surprise of 300.0%. Let's see how things are shaping up for this announcement.

Factors to Consider This Quarter

The Israel-based manufacturer of household soda machines has been seeing soft sales in the U.S., which accounts for about 30% of its revenues, due to difficult retail environment. However, international markets have been doing well.

In the last reported quarter — first-quarter 2014 — sales declined in the Americas due to elevated inventory levels at retail customers due to a weak holiday sellout in the December quarter. Also, difficult year-ago comparisons hurt sales in the reported quarter. Margins also remained weak in the quarter due to unfavorable mix, currency headwinds and higher promotional and marketing expenses.

In the second quarter, management expects revenues to increase in a mid single-digit range as soda maker sell-in will continue to remain under pressure, though to a lesser extent than the first quarter. Management hinted at the first-quarter conference call that the Americas segment will be slightly slower for the rest of the year. However, the Western Europe segment is expected to grow slightly faster than expected.

SodaStream's products are primarily sold at huge retail stores like Kohl's, Corp. KSS, Macy's, Bed Bath & Beyond.

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 of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Negative Zacks ESP:  The Earnings ESP is -3.13% as the Most Accurate Estimate stands at 31 cents per share, while the Zacks Consensus Estimate is higher at 32 cents.

Zacks Rank: SodaStream carries a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Other consumer staples stocks that have both a positive Earnings ESP and a favorable Zacks Rank are:

Treehouse Foods, Inc.THS, with an Earnings ESP of +1.21% and a Zacks Rank #1 (Strong Buy).

The J.M. Smucker Co. SJM, with an Earnings ESP of +1.46% and a Zacks Rank #3 (Hold).

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SODASTREAM INTL SODA: Free Stock Analysis Report
 
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