SodaStream Overtakes Green Mountain on Outlook: Israel OvernightVictoria Stilwell
SodaStream International Ltd., the Israeli maker of home soda machines, is beating Green Mountain Coffee Roasters Inc. in the stock market after trailing last year on prospects new partnerships will boost sales.
Shares of Airport City, Israel-based company, rose 4.6 percent to $48.50 yesterday in New York, extending a gain of 7.6 percent during the past year. Green Mountain has dropped 30 percent during the same period, after outperforming SodaStream by 61 percentage points in the previous 12-month period. The Bloomberg Israel-US Equity Index of the largest Israeli companies traded in New York climbed 0.6 to 87.59. Partner Communications Co. fell after 2012 revenue sank 20 percent.
SodaStream said yesterday that a partnership with Ocean Spray Cranberries Inc. will allow consumers to mix the co-branded juice blends with its carbonation systems. The announcement comes two weeks after the company said its sparkling water dispensers will be available in refrigerators built by Samsung Electronics Co. Green Mountain, the maker of Keurig brewers and single-serve pods, forecast this month fiscal second-quarter revenue that trailed estimates as competition increases.
“The price divergence really came from the fundamental perspective in terms of Soda being perceived as able to capture a much bigger unexploited market than Green Mountain is,” Josef Schuster, the founder of Chicago-based Ipox Schuster LLC, said in a phone interview yesterday. “The momentum for SodaStream is much more to the upside in terms of earnings outlook and sales growth. Green Mountain has not really delivered.”
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.
SodaStream’s Ocean Spray products, whose initial flavors include regular and diet versions of cranberry, cranberry-grape and cranberry-raspberry, are expected to be available during the second half of the year in the U.S. and Canada. The company already has agreements with brands including Country Time, Crystal Light and Kool-Aid.
“Those brands helped sell people on the machine itself,” Jim Chartier, an analyst at Monness, Crespi, Hardt & Co. who rates SodaStream buy, said by phone yesterday from New York. “It helps create awareness for the category and legitimizes it, especially for people in the U.S. who don’t know the SodaStream brand. They trust those flavor brands, and are therefore more willing to trust SodaStream.”
The company received 47 percent of 2012 sales from western Europe and 36 percent from the Americas, according to company data.
SodaStream reported fourth-quarter revenue of $132.9 million on Feb. 20, beating the $121.8 million median estimate of eight analysts surveyed by Bloomberg. The company sees 2013 revenue and adjusted net income improving by 25 percent, with half of the sales growth coming from the U.S.
Green Mountain, based in Waterbury, Vermont, is seeing more competition from Starbucks Corp., which recently introduced its own single-serve machine, the Verismo. Brewer shipments will decline “slightly” this quarter, compared with a year earlier, Chief Financial Officer Frances Rathke said on a conference call on Feb. 6.
SodaStream and Green Mountain “tend to attract similar types of investors who are looking for high momentum stories that have no clear direct peer and some time to have the market to themselves,” Marc Riddick, an analyst at Williams Capital Group LP who rates Green Mountain buy, said yesterday by phone in New York. As Green Mountain encounters more competition, some investors will “move onto something else that can provide outsized growth, stories like SodaStream.”
Partner, Israel’s No. 2 mobile provider, slipped 0.9 percent to $5.60 yesterday after it reported a 20 percent drop in 2012 revenue. Shares traded in Tel Aviv fell 1.6 percent to 20.56 shekels, or the equivalent of $5.55, at the close today. The benchmark TA-25 equities index gained 0.5 percent.
Chief executive officer Haim Romano predicted that trends in Israel’s competitive cellular market seen in the last year and in recent months will continue into the first quarter of 2013, according to a transcript of yesterday’s earnings call. The company was cut to neutral from buy at Israel Brokerage and Investments Ltd.
Syneron Medical Ltd., based in Yokneam Elit, Israel, rose 1.3 percent to $10.17 yesterday, halting five days of losses. The aesthetic medical product maker’s home hair removal system will be available at retailers including Nordstrom Inc. beginning in May, according to a statement yesterday.