Green Mountain implodes as SodaStream soars
The soda maker keeps short sellers at bay for now.
Green Mountain Coffee Roasters (GMCR), whose Keurig single-serve coffee makers have become ubiquitous in U.S. homes and offices, has imploded in recent days. The company has admitted that its growth is slowing and announced that it replaced its chairman and lead director because margins calls forced them to sell shares in violation of company policy.
And fears that SodaStream International (SODA) will be the next to melt down have been allayed -- at least for now.
SodaStream, based in Airport City, Israel, on Wednesday reported better-than-expected quarterly results. Net income at the maker of the trendy soda machines rose 84.3% to $10.1 million, or 48 cents, versus $5.5 million, or 28 cents, a year earlier. Revenue surged 50.2% to $87.9 million. Excluding one-time items, profit was 55 cents, beating Wall Street analysts' expectations for earnings of 35 cents on revenue of $56.82 million.
Shares of SodaStream, which have plunged more than 12% over the past month, surged in early trading as the company announced that it has begun shipping products to Wal-Mart (WMT). The company also raised its 2012 guidance. SodaStream expects revenue to rise 33% versus a 28% gain in an earlier forecast. Net income is expected to surge 50% over 2011, compared with its previous guidance of a 42% gain.
"We are committed to maintaining financial discipline to generate greater earnings power and return increased value to our shareholders over the longer term," CEO Daniel Birnbaum said in a press release.
The company reported double-digit gains across most geographies. Sales in the Americas in the three months ended March 31 surged 93% to $25.6 million and rose 50% to $45.7 million in Western Europe. Asia-Pacific revenue was $9.9 million, a 110% gain, while Central & Eastern Europe, Middle East, Africa saw sales of $6.7 million, down 33%.
Like Green Mountain, SodaStream is a favorite target of short sellers, who bet that stocks will fall. As of April 13, more than 12 million shares were held short. Though they were getting crushed Wednesday, short sellers are going to be back when the shares fall again, which is bound to happen.
SodaStream has many factors going against it. For one, people don't drink as much soda as they have in years past, a fact that backers of taxes on sugary sodas often neglect to mention. In fact, Beverage Digest estimates Americans drank an average of 44.6 gallons of carbonated soft drinks last year, the lowest level since 1987.
As the summer holiday season approaches, SodaStream's margins will be pressured as retailers demand the company slash prices since Green Mountain will be doing the same.
Very few companies are able to transform themselves from a fad to a bona fide consumer trend. SodaStream will be no different.
Jonathan Berr does not own shares of the companies listed here. Follow him on Twitter@jdberr.
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