V8 Juice Flavors Rev Campbell Soup and SodaStream's Engines
Eric is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Sodastream (NASDAQ: SODA) and Campbell Soup (NYSE: CPB) teamed up to offer V8 juice flavors for SodaStream machines, Reuters reports. This deal gives Campbell exposure to a rapidly growing market, addresses an important weakness, and supports the company's overall growth strategy. SodaStream receives an endorsement from a powerful brand name that could help it capture more of the beverage market. This deal looks like a win for both companies.
Fresh Del Monte (NYSE: FDP) showed that even a canned food company that's performed well recently recognizes that shoppers still have health concerns about canned vegetables, which isn't good news for Campbell. The Fool's Seth Jayson reports that Fresh Del Monte's 0.45 EPS figure soundly beat expectations for 0.33 EPS. Even after this bottom and top line beat, Fresh Del Monte still had a P/E of 11 and a PEG of 1.43 on Tuesday, although a new ad campaign could mean more growth soon.
The Associated Press reported that Fresh Del Monte launched the Bursting With Life ad campaign because health oriented shoppers bought fresh vegetables and avoided canned vegetables recently. Campbell plans to address this challenge by expanding its juice brands, including V-8 Splash and V-Fusion. Campbell reduces its dependence on canned soup sales and creates a new channel for its juice offerings by working with SodaStream.
Campbell's V8 fruit juice blends posted especially good results last quarter. In Campbell's 4Q 2012 earnings call transcript at Seeking Alpha, the company stated that its V8 Splash and V-Fusion lines both posted double digit quarterly growth. SodaStream helps V8 Splash and V-Fusion provide even more growth for Campbell with flavor sales, so the V8 Splash and V-Fusion lines could post even better results in future quarters.
V8 juice blends don't expose SodaStream to the problems that hurt Monster (NASDAQ: MNST), the other company that plans to disrupt the beverage industry. Monster traded for over $78 a share in June, but now it's down to $46 after health concerns about its energy drinks hit the headlines. In a Nov. 9, 2012 Bloomberg News article, Stephanie Armour reported that a Centers for Disease Control study found that some soldiers who drank energy drinks frequently dozed off during guard duty. The health concerns with Monster may be priced in now, though.
Even at Monster's current price, SodaStream still looks much cheaper. Monster has a forward P/E of 20 right now and a PEG of 1.25, according to Yahoo! Finance. Monster's income also grew by just 4.6% last quarter, which makes forward earnings estimates look shakier. SodaStream has a forward P/E of 14 and a PEG of just 1.58. SodaStream reported 67.6% income growth last quarter, smashing the earnings estimates. The Fool's Rick Aristotle Munarriz explained that SodaStream's 87 cent EPS for the quarter beat the estimates by 15 cents a share.
Many shoppers already know about Campbell's V8 brand, and Campbell advertises V8 Splash and V-Fusion itself, so SodaStream won't need a huge ad budget to get higher sales out of this partnership. Campbell gains a new way to sell two product lines that already rose in popularity recently, and reinforces its strategy of using juice sales as a major growth driver. Both Campbell Soup and SodaStream could achieve better financial results because of these new flavors.
Juice Your Earnings
SodaStream is blazing as a consumer-facing growth stock -- and it's just the kind of stock that legendary investor Peter Lynch used to single out before his peers caught on. Take a look at our analysts' premium report that will pique your interest.
enovinson has no positions in the stocks mentioned above. The Motley Fool owns shares of SodaStream. Motley Fool newsletter services recommend Monster Beverage 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.If you have questions about this post or the Fool’s blog network, click here for information.