Should You Care About SodaStream's Latest Earnings Beat?

Mr. Market is putting his wild mood swings on full display this week with shares of SodaStream , after the at-home carbonation specialist posted better-than-expected earnings.

SodaStream stock
SodaStream stock

SodaStream carbonation machines, Image Source: SodaStream

Naturally, the Israel-based company fell as much as 4% Wednesday on the beat, before closing down a little more than 2% for the day.

Investors seem to have changed their minds on Thursday, however, and the stock is currently up more than 8% during intraday trading as of this writing.

Let's peer through the smoke and mirrors, then, and see how the company really fared last quarter.

Steady growth
First quarter revenue grew 34% year over year, to $117.6 million, besting the analysts who hoped for sales of $113.11 million. GAAP diluted earnings per share rose 18.8% from the first quarter of 2012, to $0.57, also beating estimates, which called for earnings of $0.54 per diluted share. Adjusted diluted earnings per share increased an even more impressive 24%, to $0.68.

When all was said and done in March, consumers in America appear to be using the heck out of their SodaStream systems, as gas refill revenue increased 101%, and syrup unit sales grew 119%. New customers are also jumping off the fence, as soda-maker sales rose an impressive 78% from the same year-ago period.

As fellow Fool Blake Bos noted yesterday, growth was once again led by robust sales in the United States, which will likely soon become SodaStream's largest market.

After all, as I noted in January, SodaStream only really began to make its push into our soft drink-guzzling American homes over the past few years, and the company is doing all it can to command more shelf space in megastores like Target and Wal-Mart by signing new flavor partnerships with companies including Ocean Spray Cranberries, and energy drink specialist eBoost. With less than 1% penetration of the more than 130 million households in the United States, SodaStream still has more than enough room to grow.

Balance sheet, inventory
Luckily, SodaStream's healthy balance sheet should allow it to continue doing so, with $49.9 million in cash and debt comprised of only a small $8.1 million loan taken out during the quarter to "partially finance the acquisition of property, plant, and equipment" for the company's new main production site.

Relatedly, inventories increased 4.9% last quarter, to $118.2 million, in preparation for SodaStream's typically busy spring and summer seasons. Management also gave investors a heads-up, saying that inventory levels would likely remain inflated until the new production site is up and running around the end of 2014.

Based on SodaStream's strong start to the year, management also raised its previous revenue and earnings guidance by 2%, and now expects full-year 2013 revenue to grow 27% to just over $554 million, while net income should increase 20% to approximately $52.7 million.

Foolish final thoughts
All things considered, there's plenty to like about SodaStream's report, and it looks like the company is firing on all cylinders to start the year. With shares trading at just over 17 times next year's earnings, I think long-term investors who buy today will have more-than-enough reason to break out the bubbly down the road.

More expert advice from The Motley Fool
SodaStream's carbonation technology sounds simple, but this razor-and-blade company offers an intriguing opportunity for growth that could very well disrupt the soda industry. The Motley Fool's premium report on SodaStream explains the opportunities as well as the risks in the company. The report comes with a year's worth of updates, so just click here to get started.

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Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends SodaStream. The Motley Fool owns shares of SodaStream. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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