SodaStream Earnings Sizzle But Stock Price Fizzles

SodaStream International, (NASDAQ: SODA) the home carbonation system manufacturer and marketer, posted second-quarter profit far above analysts expectations.

The Israel-based company reported that net income rose 43.9 percent to $9.5 million or 45 cents a share, which was up from up from $6.6 million or 32 cents per share a year earlier. Total revenue increased 49.1 percent to $103 million compared to $69.1 million in the second quarter of 2011.

"We are very pleased to have generated our first $100 million revenue quarter ever," said CEO Daniel Birnbaum in a statement.

Gross margins grew 54.4 percent versus 53 percent for the second quarter last year. Moreover, marketing expenses rose 36 percent to $37.1 million versus $22.5 million or 32.5 percent for the prior year's second quarter.

SodaStream also raised its 2012 guidance for sales growth to 40 percent from earlier estimate of 33 percent over last year. The company increased its net income forecast from 50 percent to 55 percent above 2011.

Birnbaum said, “The successful execution of our growth strategy, combined with a strong pipeline of product innovation, gives us confidence in our ability to capture a greater share of the global beverage industry in the years ahead."

Revenue growth occurred in all regions, with revenue from the Americas more than doubling to $30.7 million. Europe sales were up 25 percent to $54 million, while Asia and the Pacific Rim revenue tripled to $9.9 million.

Some might consider SodaStream to be a growth story, but investors have not been fully convinced. Last July share prices were trading north of $70 and were trading Wednesday near $40. Yahoo Finance indicates that 67 percent of the stock's float is short. As an illustration of the high level of volatility affecting SodaStream shares, shares were up eight percent in pre-market trading Wednesday morning, but were down 3 percent within the first hour of market open. This volatility may be related to the stock's bearish short open interest.

The majority of SodaStream's competitors trade on OTC or pink sheet system, indicating that these companies may not have to file with SEC. All these competitors have a small share float, high betas and market capitalizations of well under a $1 billion.

The Wall Street adage of "buy the rumor sell the news" may have applied to SodaStream. Based the company's heavy short float and positive earnings, revenues and full year guidance, investors might have expected this stock to explode upward.