SodaStream Ready To Report Holiday Numbers

According to a recent report by Roth Capital Partners' Anton Brenner, Sodastream International Ltd SODA's Q4 results due Thursday are likely to show a revenue decline and a 17 cent difference to the downside in EPS compared to last year.

Earnings Preview

Brenner provided the following expectations Roth has on SodaStream:

• 13.1 decline in revenues, coming in at $110.0 million
• Estimated EPS of $0.18, compared to the previous year's EPS of $0.35
• A&P expense to have remained “moderate”
• Currency translations will have “dampened” revenues and income

The analyst also listed things to look out for during the release, such as management comments regarding the 2016 outlook (“as there is a broad range of Street revenue and income projections”), the new flavor lineup and its potential to spur sales momentum, the door count due to inventory reductions and retailer drops and the “gas exchange home delivery system,” anticipated to be unveiled nationally this year.

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Additionally, the report mentioned that while flavor and maker volume declined, the gas refill volume has increased. The refill increase will obviously benefit gross margins, while the maker numbers are critical in this “razor/blade model” for long-term growth.

Finally, Brenner highlighted the European market expansion for 2016 and the new production plant in Israel late 2015 are likely to help gross margins in the future as well.

The firm has reduced its price target on SodaStream to $20.

Valuation

Citing the current price of 10.6x Roth's estimated 2016 EPS and 5.4x EBITDA, the $20 price target would still be a discount to the projected 20 percent EPS growth rate, “thereby representing an attractive PE/Growth valuation.”

The analyst concluded, “We anticipate that sales momentum will be restored as the company transitions from a soda to a sparkling water focus with a much improved lineup of flavors. Factors that could impede shares of SODA from achieving our price target include, but are not limited to: Inability to increase soda maker sales volume, thereby limiting the customer base for higher margin consumable products, lack of consumer acceptance of new flavor introductions, significant reduction in retail availability and unfavorable currency translation.”

At the time of this writing, SodaStream was trading up 4.62 percent on the day at $13.36