SodaStream International Ltd. (SODA) sank to the lowest level in 2012 as Green Mountain Coffee Roasters Inc., which trades in tandem with the Israeli company, reduced its earnings forecast and dropped a record 48 percent yesterday.
SodaStream, a maker of homemade soda machines, fell 1.8 percent in New York to the weakest since Dec. 19. Green Mountain, which makes single-cup coffee pods and brewers, cut its 2012 earnings per share outlook by at least 5.7 percent from earlier guidance. The Bloomberg Israel-US Equity Index (ISRA25BN) of the most-traded Israeli companies in New York slid for a fourth day.
Both Green Mountain and SodaStream benefit from the so- called razor blade model of retailing, where profits rely on customers repeatedly buying complementary products such as gas tanks, flavor pouches and coffee pods. The 120-day correlation of gains or losses in SodaStream and Green Mountain’s shares surged to a more than eight-month high of 0.65 yesterday, signaling the companies trade closely.
SodaStream and Green Mountain “trade in tandem because they’re both broad consumer companies with the same risk characteristics,” Josef Schuster, founder of Ipox Schuster LLC, said by phone from Chicago yesterday. “There is weakness in domestic markets and Europe is really sensitive. It’s a volatile time.”
The Bloomberg Israel-US measure slipped 1.8 percent to 89.29 yesterday, following global stocks lower as growth in U.S. service industries slowed more than analysts predicted and European Central Bank President Mario Draghi said the euro area’s economic outlook has worsened.
‘More on the Downside’
Western Europe was SodaStream’s biggest source of sales in 2010, providing 62 percent of revenue, data compiled by Bloomberg show. The U.S. is now the company’s largest single country market, according to a Feb. 29. statement.
“The broader theme is that the risk has taken off for consumer companies and pushed them more on the downside,” Schuster said.
Airport City, Israel-based SodaStream tumbled to $30.48, extending its drop this year to 6.8 percent.
Shares of Green Mountain rose 6.6 percent to $27.59 after they fell by the most on record to $25.87 in New York yesterday. The company reduced its outlook for this year’s earnings to as much as $2.50 a share, down from earlier guidance of as much as $2.65. The median of 13 analysts’ estimates compiled by Bloomberg at the time of the announcement was for earnings-per- share of $2.67.
Revenue rose 37 percent to $885.1 million in the second quarter, the company’s slowest quarterly sales growth in five years, Green Mountain said on May 2. That compares with the $972 million median of 12 analysts’ estimates compiled by Bloomberg.
Green Mountain is seeing more competition from companies that make private-label coffee capsules that fit into Keurig Inc.’s machines and from Starbucks Corp. (SBUX), which in March said it will begin selling its own single-serve brewer later this year. Chief Executive Officer Lawrence Blanford has introduced the Vue coffee machine, which makes espresso-based drinks, to help deal with competition when Green Mountain’s main patents for the K- Cup expires in September.
SodaStream will probably say that first-quarter sales rose 25 percent to $56.2 million, according to the median of eight analysts’ estimates collated by Bloomberg, when reporting earnings for the period on May 9.
Shares will “probably rebound” should the company show it boosted sales in the U.S. in the first three months of the year, Jim Chartier, an analyst at Monness Crespi Hardt & Co., who recommends buying shares of SodaStream, said by phone in New York yesterday.
The Standard & Poor’s 500 Index (SPX) declined 1.1 percent to 1,376.48, as a report showed U.S. employers added fewer jobs than forecast in April. Payrolls climbed 115,000, the smallest gain in six months, after a revised 154,000 gain in March that was larger than initially estimated, Labor Department figures showed today in Washington. The median estimate of 85 economists surveyed by Bloomberg News called for a 160,000 advance.
Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies trading on the Nasdaq Stock Market, the most of any nation outside the U.S. after China. The country is also home to more startup companies per capita than the U.S.
The Tel Aviv benchmark TA-25 Index (TA-25) rose 0.8 percent to 1,167.67 yesterday, sending the gauge to the highest level in more than six months.
CEVA Inc. (CEVA), a developer of chips available in most iPhones and iPads, fell 0.5 percent today, retreating 20 percent to $17.25 this week in New York.
The Mountain View, California-based company created in 2002 as a spinoff from Israel-founded DSP Group Ltd. reduced earnings guidance for 2012 by as much as 6.6 percent to $65.5 million as customer Nokia Oyj (NOK1V) strives to revive sales, Chief Financial Officer Yaniv Arieli said on an earnings call with analysts on May 2.
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