Consumer Products

Do SodaStream Earnings Signal a Potential Buyout?

SodaStream International Ltd. (NASDAQ: SODA) reported its third-quarter results Wednesday before the market opened as $0.45 in earnings per share and $125.9 million in revenue. That was against Thomson Reuters consensus estimates of $0.39 in earnings per share and $131.74 million in revenue. In the third quarter of the previous year, SodaStream reported $0.76 in earnings per share and revenue of $144.58 million.

The company revised guidance for the 2014 full year to account for a 9% decrease in revenue and a 42% decrease in net income, both over the 2013 numbers. There are consensus estimates for the full year of $1.37 in earnings per share and $547.26 in revenue.

Net income for the third quarter was $9.5 million, compared to $16.4 million in the same period in the previous year. Gross margin for this past quarter shrank to 51.2% from 54.1% in the previous year. The decline in gross margin was due to the deleveraging of fixed costs on lower sales and a higher share of lower margin soda makers in the sales mix.

In recent news, SodaStream and Pepsi announced that they will partner for a small-scale, limited test. However both companies are stressing that, despite the test, there are no current discussions between them for any broader business collaboration.

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The shares of SodaStream took a hit earlier in October when the company issued an earnings warning. 24/7 Wall St covered this and the potential for a buyout. After the earnings actually came out, it would appear that a potential buyout might not be far off.

Daniel Birnbaum, CEO of SodaStream, said:

As we previously announced, our third quarter performance was pressured by challenging selling conditions for soda makers and flavors primarily in the U.S. Our performance outside the U.S. was mixed during the third quarter with strength in company operated markets such as Germany, Australia, Canada and Switzerland, partially offset by declines in distributor markets, namely France and the Czech Republic.

Zacks downgraded SodaStream to an Underperform rating from Neutral, with a price target of $20.40.

Shares of SodaStream closed Tuesday down slightly at $21.92. Following the release of the earnings report, the initial response in the premarket was negative and shares were down almost 3% at $21.30.

The stock has a consensus analyst price target of $30.14 and a 52-week trading range of $20.13 to $64.00. SodaStream has a market cap of $462 million.

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