Will SodaStream Be Acquired by Pepsi? SodaStream Earnings Preview

NEW YORK (TheStreet) -- SodaStream International (SODA) will report its earnings for the first fiscal quarter of 2014  before the market opens on Wednesday. SodaStream produces a consumer do-it-yourself beverage carbonation system. Buyout rumors have been swirling over SodaStream ever since Coca-Cola (KO) took a 10% stake in Keurig Green Mountain (GMCR) back in February.

Today Coke announced it was increasing its stake in Keurig Green Mountain to 16%. The coffee stock is up nearly 10% in midday trading, to $121.25 at 2:15 p.m.

Ever since Coke took a stake in Green Mountain --likely to bring Coca-Cola beverages to the next iteration of the popular Keurig at-home beverage system -- rumors have been swirling that PepsiCo (PEP) or another beverage giant may be interested in acquiring SodaStream.

This quarter, Wall Street is expecting SodaStream's earnings to come in much weaker than they did in the first quarter of last year, while sales only grew by a negligible $280,000. Concerns over slowing revenue growth have made a buyout of SodaStream a staple of the rumor mill over the past six months. A boost from a larger company with a more successful brand could help raise awareness of SodaStream's product and give instant access to the at-home carbonation market to an established beverage company.

On the crowdsourced merger and acquisition prediction platform, Mergerize.com, five buyout predictions have been made on SodaStream, with PepsiCo being the most commonly predicted acquirer. Other possible buyers could be Starbucks (SBUX) and Coca-Cola. In March, Starbucks gave up an exclusive license for high-end coffee pods on the Keurig system.

Although Starbucks and Green Mountain have had a partnership in recent years, the idea of Starbucks acquiring SodaStream and going head to head with Green Mountain in at-home beverage systems seems unlikely, but it's not outside the realm of possibility. After all, who would have guessed that Apple (AAPL) is in late stage talks to acquire Beats Electronics?

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The chart below is from data submitted to the Estimize.com platform by analyst contributors.

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The current Wall Street consensus according to Zacks Investment Research is for Soda Stream to report earnings of 2 cents per share and $117.88 million in revenue. Compare that to the Estimize.com consensus from 19 hedge analysts, asset management firms, and independet analysts: 13 cents in earnings per share and a revenue estimate of $123.22 million.

Over the previous six quarters the consensus from Estimize.com has been more accurate than Wall Street in forecasting SodaStream's earnings and revenue five and four times respectively. By tapping into a wider range of contributors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time. And Estimize does a better job of representing the market's actual expectations, according to Deutsche Bank Quantitative Research and a study from Rice University.

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The analyst with the highest estimate confidence rating this quarter is BradHewitt91, who projects 2 cents in earnings per share and $120.00 million in revenue. BradHewitt91 is ranked 12th in the Estimize Spring 2014 season, among over 4,450 contributing analysts. This season BradHewitt91 has been more accurate than Wall Street in forecasting earnings and revenue 61% and 58% of the time, respectively, throughout 124 estimates.

Estimate confidence ratings are calculated through algorithms which look at correlations between analyst track records and tendencies. In this case, BradHewitt91 is predicting that SodaStream will beat Estimize community expectations on profit, but come up short on sales.

With earnings expected to take a big hit this quarter, a buyout at any premium to the current market valuation would probably come as a welcome surprise to investors. The market is currently giving SodaStream a market capitalization of $847 million. The average acquisition prediction on Mergerize.com has SodaStream selling for $950 million sometime later this fall.

Do you think SodaStream will be acquired by Pepsi or a different company? If so, check out Mergerize.com and make your own prediction.

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At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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