SodaStream International Ltd. SODA is set to report first-quarter 2015 results on May 6, before the market opens. Last quarter, the Israel-based manufacturer of household soda makers delivered a positive earnings surprise of 75.00% as improved gross margins made up for the soft revenues.
Let’s see how things are shaping up for this announcement.
Factors to Consider
SodaStream has been reporting soft sales in the U.S. over the past few quarters due to low demand for its products — soda/sparkling water machines and flavored syrups.
The U.S. carbonated soft drink (CSD) market is facing troubles as consumers are shifting away from traditional soda toward more natural, less caloric and water-based beverages.
SodaStream has already shifted toward health and wellness brands and is making significant changes in its growth strategies. The company plans to launch a completely new portfolio of water enhanced flavors to boost demand for its soda machines. However, efforts to reinvigorate sales have not yielded any positive results yet.
Management plans to clear inventory of its sparkling water makers and flavors through aggressive promotional and discounts ahead of the new product launches scheduled in the latter half of the year. Management expects the additional promotional activities to create gross margin pressure in the first quarter as well as the rest of the year.
Moreover, SodaStream anticipates significant currency headwinds in 2015 due to the wakening of many currencies against the U.S. dollar. Majority of the currency headwinds are expected in the first half of the year as hence mar the results in the to-be-reported quarter.
SodaStream’s products are primarily sold at major retail stores like Kohl’s, Corp. KSS, Macy’s and 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 #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at 6 cents.
Zacks Rank: SodaStream’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Some stocks in the broader consumer staples sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Treehouse Foods, Inc. THS, with an Earnings ESP of +1.72% and a Zacks Rank #3.
Tyson Foods, Inc. TSN, with an Earnings ESP of +1.37% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment