With the threat from Coca-Cola Co gone, investors in SodaStream International Ltd have reason to be upbeat.
The exit of a competitor, financially backed by the maker of Coke, has raised the odds that SodaStream chief executive officer Daniel Birnbaum can make good on a pledge to boost US sales of his at-home carbonation machines.
Shares soared in May after first-quarter profit and revenue beat estimates, yet another sign of confidence in his vision.
There was a time when Keurig Green Mountain Inc’s entrance into the cold beverage market and partnership with Coca-Cola filled SodaStream investors with dread. Would it be able to grow in the US?
The odds look better after Keurig, absorbed by private equity firm JAB Holding Co in March, said in June it would discontinue its single-serve home soda appliance after a troubled rollout.
Shares have responded in kind: up 13 percent last month and touching US$24.16 on July 22, the highest since October 2014. They closed at US$24.05 in New York last week.
“They had a failed strategy and a really dangerous competitor in Keurig with Coke,” said David Barr, who oversees about US$500 million, including SodaStream shares, at PenderFund Capital in Vancouver. “Now they do not have that competitor anymore and I think they have the right strategy.”
Birnbaum has switched tactics. He is now trying to invigorate sales by reinventing SodaStream as a health-conscious brand, abandoning an earlier marketing ploy that pitted the company directly against soda titans Coca-Cola and PepsiCo Inc.
An investor relations representative for Lod, Israel-based SodaStream did not respond to an e-mailed request for comment sent after business hours in Israel.
While Birnbaum has made the company more efficient by consolidating production and logistics in Israel, his main goal of growing household penetration in the US has so far proved elusive.
The better-than-expected earnings last quarter were largely driven by strong European demand, he told investors at the time.
Five out of six analysts still have a neutral rating on the stock, data compiled by Bloomberg showed. The company’s market capitalization is US$508 million, about one-third of its peak three years ago.
SodaStream is to report US$4.62 million in adjusted net profit on US$106 million in revenue in the second quarter, a more than 30 percent increase from a year ago, according to the average estimate of five analysts surveyed by Bloomberg.
Profit is expected to decline 8 percent this year, versus 47 percent last year, while revenue is to grow 6 percent, the first annual expansion since 2013, estimates showed.
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