SodaStream International Ltd Has Plenty to Prove on Feb. 25

SodaStream will lay an ugly 2014 to rest when it reports financial results for the fourth quarter on Wednesday morning.

It's not going to be the kind of stuff that the market likes to see out of its former pop stars. Analysts see sales plunging 24% to $127.2 million compared to the prior year's holiday quarter, in line with the recent trend of sluggishness in key European markets and a brutal decline in the Americas. Revenue had checked in with a 13% year-over-slide in the third quarter.

There should be some relative relief on the bottom line. Wall Street pros are forecasting a profit of $0.18 a share for the fourth quarter, up sharply from the $0.03 a share it earned a year earlier.

The 2013 holiday quarter was a disaster on the bottom line. Margins got crushed as unsold starter kits forced SodaStream to scramble for solutions. It granted retailer requests for markdowns as the telltale shopping season intensified. It also had to shift surplus inventory to lower-margin distribution outlets, selling 40,000 soda makers through HSN in a single day and having to reconfigure another 20,000 unsold soda makers. The reconfiguration involved new instructions, packaging, and components for the sale of 20,000 systems being moved from U.S. to Canada as well as repackaging 450,000 systems as new Mega Packs that sold well in some countries but not in others. The mad scramble during the 2013 holiday shopping season resulted in SodaStream warning in January of last year that it would roughly break even for the quarter. It did marginally better than that.

Things should be somewhat easier this time around in terms of margin-chomping bugaboos, but we can't celebrate the expected profit of $0.18 a share. Let's not forget that this is the same SodaStream that posted an adjusted profit of $0.45 a share during the 2012 holiday quarter.

The fine line between fizzy and flat

SodaStream's stock plummeted 59% last year, and its first step toward bouncing back in 2015 will come with Wednesday morning's report. Investors will want to an update on how some of the initiatives that began late last year panned out.

The big story was PepsiCostepping up as a partner to provide select Pepsi and Sierra Mist flavors as capsules. The new Pepsi Homemade line was to be tested out through a couple of retailers in central Florida, and it will be interesting to hear anything that the company can offer on that front. PepsiCo's two biggest rivals are already backers of the upcoming Keurig Cold platform, so it only makes sense that PepsiCo and SodaStream make something happen in the realm of home carbonation.

Another big development at SodaStream is its shift in marketing. It's not just the lack of a Super Bowl ad earlier this month or the slow fade of Scarlett Johansson as a brand ambassador. After years of watching carbonated soda sales decline in this country, SodaStream is trying to reposition its starter kit as a maker of sparkling water instead of flavored soft drinks. CEO Dan Birnbaum has been recently talking up third-party studies showing that SodaStream owners consume three more glasses of water a day than non-owners. Yes, SodaStream is trying to play the nutrition and health advocacy card, and that goes with its new "water made exciting" slogan.

However, burned investors don't care about making water exciting again. Nearing Wednesday's report "SodaStream made exciting" is the ideal new mantra.

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The article SodaStream International Ltd Has Plenty to Prove on Feb. 25 originally appeared on

Rick Munarriz owns shares of SodaStream. The Motley Fool recommends PepsiCo and SodaStream. The Motley Fool owns shares of PepsiCo and 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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