SodaStream (SODA) Acquisition Not Likely Near-Term Given Earnings Trajectory, Says Deutsche Bank

Deutsche Bank maintained a Hold rating on SodaStream International (NASDAQ: SODA) with a price target of $32. Earlier SodaStream pronounced disappointing Q3 results. Analyst Bill Schmitz Jr noted possible inventory destocking. He also thinks an acquisition is unlikely until business stabilizes.

"While the company hasn’t provided details of the shortfall other than saying US is primarily responsible for the miss vs. guidance and consensus, implied US growth suggests significant inventory destocking since Nielsen sell-through trends were closer to the 12% US decline we were modeling. Moreover, comparisons and expectations for Europe remain tough and it remains to be seen how steadfast distributors and retailers will be in this critical region in a slowing growth environment, noting sodamaker penetration is higher and refill canisters are a much bigger contributor to the business there," said Schmitz.

"Maintaining Hold and note considerable margin potential if the company turns off the spending spigot and instead focuses on selling higher-margin refill canisters and syrups, with the biggest risk distribution losses as the home carbonation category slows and competition enters with deeper pockets," he continued.

" . . . we believe the company may well be looking for a partner to take the business forward. But any potential acquirer would likely need greater clarity on the forward sales and earnings trajectory, which makes the premium multiple many have pondered unlikely until business stabilizes, trade inventory is cleaned up and growth opportunities outside the US - including sustainability of outsized growth in Europe - are better proven out," he added.

For an analyst ratings summary and ratings history on SodaStream International click here. For more ratings news on SodaStream International click here.

Shares of SodaStream International closed at $27.57 yesterday.

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