The Zacks Analyst Blog Highlights: Booz Allen Hamilton Holding, SodaStream International, PepsiCo, Coca-Cola and Dr Pepper Snapple Group

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Jun 12, 2013, 09:30 ET

CHICAGO, June 12, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Booz Allen Hamilton Holding Corp. (NYSE:BAH-Free Report), SodaStream International Ltd. (Nasdaq:SODA-Free Report), PepsiCo, Inc. (NYSE:PEP-Free Report), The Coca-Cola Company (NYSE:KO-Free Report) and Dr Pepper Snapple Group Inc. (NYSE:DPS-Free Report).

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Here are highlights from Tuesday's Analyst Blog:

Booz Allen Shares Slip on PRISM Leak

Virginia-based management and technology consulting services provider, Booz Allen Hamilton Holding Corp.'s (NYSE:BAH-Free Report) shares slumped 2.6% after news one of its employees revealed classified information related to a National Security Agency (NSA) electronic surveillance program (called PRISM).

The 29-year-old Edward Snowden responsible for the leak was once associated with the U.S. Central Intelligence Agency (CIA). He broke the story to the U.K-based daily The Guardian and admitted that some secret information regarding the NSA's PRISM program had been given out as a news byte to a section of the media. (Snowden has previously spent four years working with several contractors of the NSA.)

The NSA, one of the secret agencies of the U.S. Department of Defense, is responsible for the collection and analysis of foreign communications and foreign signals intelligence, as well as protecting the U.S. government's communications and information systems.

Booz Allen, which has been Snowden's employer for just about three months, may be significantly impacted by the outcome of the probe. Being one of the biggest contenders for government contracts (roughly 99.0% of its revenues), it could be hard for Booz Allen to escape responsibility for inadequate safety measures.

Booz Allen's close association with the federal agencies is mainly due to its mission critical services that are helpful for combating global terrorism, improving cyber capabilities, transforming the healthcare system, improving efficiency and managing change within the government, and protecting the environment.

Booz Allen reported a solid fourth quarter 2013 with earnings of 39 cents topping the Zacks Consensus Estimate by 11.4%. Though year-over-year revenue growth was negligible, Booz Allen recorded a total backlog of $11.83 billion.

We think that the Snowden issue and tight spending by federal agencies can jeopardize its position. If this issue is resolved, however, the solid backlog, deal pipeline, planned acquisitions and strategic investments in core business areas could result in a good year for the company.

SodaStream Hits 52-Week High

Shares of SodaStream International Ltd.'s (Nasdaq:SODA-Free Report) jumped to a 52-week high of $77.80 on Monday, Jun 11, on market rumors of its acquisition by snack and beverage giant PepsiCo, Inc. (NYSE:PEP-Free Report).

The closing price of the Israeli home soda-machine maker on Jun 10 was $76.11, representing a huge 1-year return of about 119.5%. Average volume of shares traded over the last three months stands at approximately 1541K.

Last week, an Israeli newspaper reported that PepsiCo was considering buying SodaStream. It is rumored that the purchase price was a whopping $2 billion. PepsiCo has however, denied the media reports to Reuters.

SodaStream commands a global leadership position in the home beverage carbonation market. Its soda-making systems offer a healthier and a convenient way to enjoy flavored carbonated sodas at home than the traditional soft drinks sold by PepsiCo and rivals The Coca-Cola Company (NYSE:KO-Free Report) and Dr Pepper Snapple Group Inc. (NYSE:DPS-Free Report).

We believe that SodaStream would make a strategic buy for PepsiCo. PepsiCo could benefit from solid demand for SodaStream's products in the U.S., its expanding strategic partnerships, enhanced marketing activities, regular product innovations, accretive acquisitions and successful strategic investments. These attributes have helped SodaStream deliver solid profits over the past few quarters. In fact, the company has enjoyed tremendous sales growth and expanded retail presence in the U.S. in sharp contrast to sluggish soft drinks sales witnessed by the beverage giants.

The deal will also go in sync with PepsiCo's increasing efforts to make low calorie beverages, non-carbonated beverages and healthier snacks to reap benefits from shifting consumer preference for good-for-you and health and wellness products. Many analysts however, believe that a joint venture between PepsiCo and SodaStream was a more likely option.

Both SodaStream and PepsiCo carry a Zacks Rank #2 (Buy).

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