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While SodaStream (NASDAQ:SODA) has been firing on all cylinders since the launch of its IPO, the stock has not. Thousands of investors have been finding themselves at the mercy of this crazy stock as it seems to be disjointed from the fundamental story of SodaStream's business execution, revenue growth and earnings growth. If you are a SodaStream investor then you already know its trading history and probably want a little more insight into this quarter and why it should prove to be another beat on the top and bottom line. Let's focus on machine sales and distribution because they go together and Wall Street seems to focus keenly on these two developments when it comes to SODA.

First, let's look at the distribution channel and analyze the additional retail outlets on a QoQ basis. Of course, we all know by now that SodaStream expanded into 2,900 Wal-Mart (NYSE:WMT) stores in the recent quarter, but what you may not know is that just last week SodaStream entered another 140 Wal-Mart stores in Canada. So are there other new retail distributors? Of course, SodaStream also expanded in Australia by way of Target Australia Pty Ltd. Target Australia Pty Ltd. is not affiliated with Target Corporation (NYSE:TGT) here in the USA despite popular belief, but the rights to the Target USA logo were granted to Target Australia Pty Ltd. by the Dayton Hudson Corporation, also known as Target Corporation here in the US. Target Australia Pty Ltd. boasts 295 stores - another great retail partner for SodaStream International Ltd.

The last addition in the recent quarter is a little known retailer named Brandsmart USA. While they only have 10 stores in total and are located in just two states, Florida and Georgia, their stores range from 45,000 to 60,000 square feet, selling all kinds of merchandise for the home. They are much like Best Buy (NYSE:BBY), but with a car-salesman-like atmosphere. Best Buy also participates in the SodaStream CO2 exchange program and I'll talk a little more about CO2 later in this article.

Next we have to compare total distribution, YoY. We know there are at least another 3,340 doors in the USA and Australia alone and certainly SodaStream has added retail distribution in other areas of the globe, but there are also two countries in Q2 2012 that were not selling SodaStream products in Q2 of 2011. Those two countries are Japan and Brazil. Well, the fact is that Brazil's original purchase orders were booked in Q1 of 2012 and recognized in that quarter, and since the product just hit retail shelves in Brazil, new orders more than likely have not been placed in Q2 so we have to eliminate Brazil from impacting Q2 results this year. Japan, on the other hand, is a certainty. Japan is among SodaStream's fastest growing markets and the rate of sales has been strong QoQ. Orders from the Japanese distribution partner in the quarter will definitively improve SodaStream's results in the next earnings report.

Now that we have a better handle on the growth of retail distribution, let's talk machine unit sales expectations as that seems to be what Wall Street is most concerned with. It is a valid concern because SodaStream has to continue to grow its consumer base. In Q1 2012 SodaStream grew machine unit sales by 15% YoY. If the company reports anything less than fifteen percent like it did in the fourth quarter of 2011, investors will likely be disappointed. In the second quarter of 2011, SodaStream sold roughly 635,000 machine units. If we agree that they need to sell at least fifteen percent more than that in the second quarter this year, the total machine unit sales would need to equal at least 730,000, which, frankly speaking, will be fairly easy for SodaStream to beat and I will explain why.

Firstly, the company sold 687,000 machines in the first quarter this year without Wal-Mart, Target Australia Pty Ltd, Brandsmart USA, the Czech distributor, and SodaStream's newly acquired Empire distributor, but now the company does have all these distribution arms ordering in the quarter. If we really want to look deeper as to how they can achieve the quarterly growth necessary, all we have to do is look at the numbers. SodaStream has roughly 60,000 retail doors across the globe. That means each store has to sell less than 1 unit /week/door in the quarter. It's basic math really and for the following equation we will use round numbers, not a less than 1 value as indicated above:

60,000 units x 1-unit per door x 13 weeks = Estimated total sales.

This gives you an estimated number of 780,000 units sold, which actually exceeds the 15% requisite. With most retailers selling much more that 1-unit/week, the actual machine sales ought to be much higher. They have been doing more than that each and every quarter so this quarter shouldn't be any different. In the most recent channel check report conducted by Moness Crespi, Hardt and Co., Wal-Mart sales are blowing through the roof.

Flavor sales are also important as they indicate retention and overall use of the system. Of course flavors spiked in the second quarter of 2011, in large part due to the oversized order filled for SodaStream's Czech distributor, but with a greater installed base and a recent quarter that already came close to equaling the flavor syrup sales from the second quarter of 2011, SodaStream should easily surpass last year's 2nd quarter numbers for this particular metric. In addition, our recent channel checks show that SodaStream users are not buying the new Kraft flavors instead of their usual flavor purchases, but rather in addition to those usual flavor syrup purchases.

Lastly, if you're looking for a meaningful announcement on the conference call as the company is known to do, they might announce that Tesco (OTCPK:TSCDY) in Europe will be participating in the gas exchange program. This announcement means a big purchase order has to be filled for Tesco and that completes the circle of the SodaStream system. Another possible announcement could include an update on the company's search for a cosmetics partner in Japan. This revolutionary company is just getting started and the future looks bright.

Look for my next update on SODA to be issued in the coming week.

Source: How To Decipher Quarterly Machine Sales For SodaStream