Bear of the Day: SodaStream (SODA) - Bear of the Day
17 January 2014 - 8:48PM
Zacks
SodaStream (SODA) disappointed the Street on October 30 and
analysts knocked down EPS estimates sufficiently to drop the stock
to a Zacks #4 Rank Strong Sell the next day.
Since then, shares fell from the high $50s to
around $50 where they attempted to hold the line. But this week
came the blindside that every investor hates: the
preannouncement.
SODA management revealed on Monday that the outlook
isn't getting any better, owing to a number of factors, including a
challenging US holiday season, lower sell-in prices, increased
production costs, as well as unfavorable product mix and, of
course, foreign exchange. Yada, yada, yada.
But the headline from Briefing.com at 7:40am ET
said it all as the stock dropped 26% from $50 to $37: SodaStream
sees FY13 adj. net income $52.5 mln from $65 mln vs. $63 mln
consensus.
As a fresh round of downward earnings estimate
revisions (EER) piled in this week, the stock slipped to a Zacks #5
Rank Strong Sell on Thursday. Here's what Oppenheimer analysts had
to say...
"We now forecast 2013 adjusted EPS of $2.45, down
from our prior estimate of $3.05 and up only slightly from the
prior year's $2.39. We are also reducing our 2014 adjusted EPS
estimate to $3.00, which is up 22% over our revised 2013 forecast
but down sharply from our prior estimate of $3.70."
Lipstick on a Bombshell
How can you soften the blow when you preannounce?
Offer some other good news -- or a powerful distraction at least.
In the case of SodaStream, they went for both with the announcement
that the company signed actress Scarlett Johansson as its
first-ever Global Brand Ambassador.
The multi-year partnership will kick-off when
SodaStream premieres its first ad featuring Johansson during Super
Bowl XLVIII on Sunday, February 2, 2014.
How interesting is it that this was revealed two
days before the earnings preannouncement?
Don't get me wrong, I think bringing Scarlett on
was a beautiful move. She can only help.
And I'm not suggesting anything but random
coincidence. In one sense, the bold marketing move signals a
company with its sights still set on strong global growth and
deeper household penetration, as well as new product
innovations.
In short, the long-term growth story for SodaStream
may still be very attractive, especially at these valuations. But
we need to see the company get through this rough patch first to be
a buyer of shares.
And we'll know the coast is clear when the
estimates stabilize and begin rising again. The Zacks Rank will let
us know.
Kevin Cook is a Senior Stock Strategist for
Zacks where he runs the Follow The Money portfolio.
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