3 Things That Can Go Wrong for SodaStream on Wednesday

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There aren't a lot of investors who saw the dramatic rebirth of SodaStream (NASDAQ: SODA) coming. The company behind the namesake machines that crank out carbonated beverages fell out of favor as soft drink consumption trends worsened, only to charge back into favor as sparkling water became all the rage.

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SodaStream stock has more than quadrupled since the start of 2016, rising 78% last year after soaring 142% in 2016. The shares are beating the market again in 2018, hitting new all-time highs earlier this month. Going from flat to fizzy is a feat typically reserved for its beverage makers, but SodaStream stock has staged a turnaround for the ages. It reports fresh financials on Wednesday morning, and while momentum is on its side, now is a good time to go over a few of the things that can trip up this carbonated renaissance.

1. Growth can fail to impress

SodaStream began growing sales and earnings again in 2016, so no one's going to be shocked when it comes through with another growth period on Wednesday. Analysts see earnings per share rising 13% to $0.80 as revenue rises 15% to $151.6 million.

Investors have been spoiled at this point, making it harder to wow the market with growth in the low teens. It may be SodaStream's best top-line gain in a year, but it'll be the weakest growth on the bottom line in nearly two years. The turnaround has been largely discounted. SodaStream needs to find new rabbits to pull out of its hat.

2. Earnings surprises can continue to narrow

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Wall Street pros are also getting better at sizing up SodaStream. The new king of pop is still landing ahead of expectations, but its previous quarter marked the end of a juicy streak of six consecutive quarters of beating analyst profit targets by a double-digit percentage margin.

Quarter EPS Estimate EPS Actual Surprise
Q4 2016 $0.36 $0.71 97%
Q1 2017 $0.43 $0.66 54%
Q2 2017 $0.53 $0.64 21%
Q3 2017 $0.83 $0.87 5%

The trend isn't very encouraging. The size of the beat has been deteriorating sharply over the past year. This doesn't mean that SodaStream is going to merely meet or possibly miss market forecasts, but if the gap continues to narrow, it's a good indicator that the SodaStream success story is already priced into the stock.

3. American sales can continue to languish

SodaStream's brand renaissance and recent financial growth are not happening in the U.S. to the same extent as other countries. The Americas segment is the slowest-growing of the four geographic regions for SodaStream, with sales rising 1.2% in the third quarter and 6.6% for the first nine months of last year. The other three regions are growing at a double-digit pace.

Western Europe accounts for more than 60% of revenue. One can argue that SodaStream doesn't need the Americas to be bigger than a little more than one-fifth of its business, but the Americas segment also proved to be a leading indicator when the stock initially fell from grace several years ago. If revenue growth in the Americas turns negative, it could scare off investors.

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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool owns shares of SodaStream. The Motley Fool has a disclosure policy.