Although SodaStream (SODA – Snapshot Report) has developed a very innovative product that has the potential to save customers money, the company has hit a wall as of late. The novelty of making your own soda at home appears to have worn off for SODA, as the company now finds itself in a bit of trouble.
Recent SODA History
SODA is moving further away from the ‘soda’ part of its name and into a variety of other carbonated products. The latest of which focuses on sparkling water which is probably good news since many people are starting to trend away from sodas or at least reduce them a bit in their regular diets.
These trends have already started to hit SODA in recent months as the company has seen big declines in its soda starter kit portfolio. Some of the recent quarters have seen year-over-year declines approaching 35% for this metric so clearly consumers are starting to shift their tastes.
If this wasn’t enough, competitors are starting to get in on the home carbonation game which is a trend that could easily crush margins for SODA. Green Mountain is partnering with Coca-Cola on a Keurig Cold machine and with the top brand in the world of beverages getting into the home carbonation market, it could continue to be a tough time for SODA in the future. No wonder SODA is moving in on the more fragmented carbonated water business!
But can flavored & carbonated water save SODA’s business and pump the company back to growth? Probably not, at least if you look to recent analyst estimate revisions for SODA stock. According to these people who follow the company the closest, prospects for SODA are looking pretty dim in the near term.
Over the past two months, the consensus EPS for SODA’s current quarter has declined from 15 cents to just six cents per share. We have also seen a similar trend for the current year as the consensus EPS has stumbled from $1.26 two months ago to just 93 cents today.
This bakes in truly awful growth rates for SODA with the current quarter and current year numbers (yoy) coming in below -25%. Add in the fact that SODA finds itself in an industry in the bottom 10% and it is tough to be bullish on SODA these days.
Given these factors and the rising competition in the space, investors shouldn’t be surprised to note that we have given this stock a Zacks Rank #5 (Strong Sell). The stock has already lost about 50% of its value in the past year, and it is really tough to get optimistic on SODA right now.
So while SODA might be a strong sell, there are actually a few beverage stocks which do make the grade. One of the top picks right now in this department looks to be Monster Beverage (MNST – Analyst Report), a company that has earned itself a Zacks Rank #1 (Strong Buy).
MNST has seen rising earnings estimate revisions in the past few weeks and it is expected to grow at an impressive clip as well. In fact, MNST has a Growth Score of B thanks to double digit margins, cash flow growth, and projected EPS growth. So if you are looking for an impressive stock in this market segment, make sure to check out Monster Beverage as it is clearly better positioned than SODA for the near term.
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 >>