SodaStream International Ltd. (SODA) is set to report third-quarter 2014 results on Oct 29, before the market opens. Last quarter, it posted a positive earnings surprise of 34.38%. Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
On Oct 7, 2014, SodaStream reported lackluster third-quarter 2014 preliminary results. The Israel-based manufacturer of household soda machines expects third-quarter revenues of around $125 million, reflecting a year-over-year decline of 13.6% and a sequential fall of 11.5%. Meanwhile, operating income is expected at around $8.5 million, again indicating a decline of 48.2% year over year. The Zacks Consensus revenue estimate is $141 million for the quarter.
The discouraging third-quarter preliminary numbers can be attributed to the low soda and flavor demand in the U.S. Management claims that though the company has quite a number of loyal customers, it has failed to gain new customers for its home carbonation systems during the quarter.
SodaStream has been facing soft sales in U.S. over the past few quarters, despite delivering solid international sales. Also, efforts to reinvigorate sales have failed miserably. Even the launch of hotspots in about 1,500 Wal-Mart Stores Inc. (WMT) outlets during the second quarter did not have the desired effect on demand.
Management believes that it needs to make significant changes in growth strategies. The company is already shifting toward health and wellness brands. However, it is yet to be seen if the company will be able to successfully recover demand for its products in the near future.
Earnings Whisper?
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: SodaStream’s Earnings ESP is -17.65% as the Most Accurate Estimate stands at 42 cents while the Zacks Consensus Estimate is higher at 51 cents.
Zacks Rank #5 (Strong 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 stocks in the consumer staples sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
The Hershey Company (HSY) with Earnings ESP of +2.78% and a Zacks Rank #3 (Hold).
Post Holdings, Inc. (POST) has an Earnings ESP of +50.00% and a Zacks Rank #1 (Strong Buy).
Central Garden & Pet Company (CENT) with Earnings ESP of +32.00% and a Zacks Rank #3.
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