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Sodastream International Ltd (SODA) Should Be Soaring Right Now

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This "Coca-Cola Killer" is a Great Holiday Growth Stock to OwnYou get the feeling that whatever Sodastream International Ltd (NASDAQ:SODA) does, it will never be good enough for Wall Street.

Shares of the company behind the namesake beverage system that turns still water into sparkling soda opened slightly lower this morning despite posting blowout financial results.

Revenue growth accelerated during the holiday quarter, soaring 55% to $132.9 million. Adjusted net income clocked in at $0.45 a share. Analysts were only targeting a profit of $0.39 a share on $121.5 million.

SodaStream leaving analyst projections in the dust isn’t new. The Israeli-based company has consistently trounced bottom-line expectations since going public three years ago. It wasn’t even close in 2012, as SodaStream beat Wall Street targets by double-digit percentage margins every time out.

EPS est. EPS Surprise
Q1 2012 $0.46 $0.55 20%
Q2 2012 $0.46 $0.52 13%
Q3 2012 $0.72 $0.87 21%
Q4 2012 $0.39 $0.45 15%

Source: Thomson Reuters.

SodaStream sold 1.1 million starter kits, breaking the million mark for the first time. SodaStream’s previous record was the 941,000 soda makers it sold during the third quarter. The 4.3 million CO2 refills matched the third quarter’s tally while the 7.4 million soda flavors sold lagged the record 7.7 million from the third quarter.

The sequential stagnancy on the carbonators and outright decline on the syrup bottles aren’t problematic. This is a seasonally slow period for soda consumption given the company’s stronghold in Europe and North America, where refreshing soft drinks aren’t as compelling in cool weather. The soda makers likely sold briskly as holiday gifts, and the real payoff here will come later this year as the weather starts to heat up and SodaStream owners start getting “busy with the fizzy” again.

The coast is clear for 2013
Naturally one would then gravitate toward SodaStream’s outlook as the root of the market’s uninspired reaction, but there’s nothing alarming there, either.

SodaStream is initiating guidance for the year ahead by targeting revenue and adjusted earnings to climb 25% in 2013. This may seem to be a mixed showing when assessing Wall Street expectations for revenue to climb 20% to $510.2 million with profitability soaring 28% to $2.74 a share, but those percentages are based on 2012 forecast results that are now obsolete.

Applying 25% to SodaStream’s actual 2012 results would result in adjusted earnings of $2.99 a share on $545.4 million in revenue. OK, the bottom-line figure will be slightly lower given the likelihood of the share count moving higher, but it’s still going to force analysts to push their projections higher. Some financial reports this morning calling the guidance weak simply forgot to do the math.

If you want to make Mr. Market look even sillier, go back a year. SodaStream’s guidance then was for revenue to climb just 28% in 2012. Revenue actually wound up soaring 51% last year. In other words, SodaStream’s guidance has historically proven to be very conservative.

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