Can SodaStream Stage a Real Recovery Alone?

Quarterly earnings were slightly ahead of estimates at $0.16 per share versus a $0.14 consensus estimate. Revenue was up 26% to $168.1 million, versus a consensus estimate of $167.33 million.

Here is where you see the real problems developing – gross margin in the fourth quarter 2013 was down to 42.4% versus 53.0% a year earlier. The company listed enough items in the excuse for lower margins that it should have just said costs are higher across the board.

SodaStream’s 2014 revenue guidance was put at 15% growth (close to $647 million) against an estimate of almost $660 million, while EBITDA was projected to rise by about 11%. Unfortunately, net income growth was projected to rise by about 3% in 2014 – implying additional margin compression.

So, with weak numbers you might expect that SodaStream shares would be falling. The stock is actually up 6% to $41.51 against a 52-week range of $35.27 to $77.80.

The reality is that the report may have not been great but it was good enough considering the drop we have already seen here. There is also the notion that Pepsico Inc. (NYSE: PEP) could become an acquirer of SodaStream to challenge the Coke-Green Mountain deal.

For Pepsico to acquire SodaStream for its cold beverage deal to compete against Coke and Green Mountain, the deal would be tiny. SodaStream’s market cap is just above $860 million for the entire company. Pepsi’s market cap is close to $120 billion, so it would not even likely require shareholder approval at Pepsico. This means that Pepsi could probably buy the entire company for less than Coke’s 10% minority stake price for Green Mountain.

A buyout is of course not a certainty. Still, that is adding to the SodaStream stock fizz on Wednesday.