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The share price of iRobot Corporation (IRBT - Analyst Report) plunged 3.8% on Aug 6, 2013 to close the trading session at $33.61. The shares of the robot maker have been trending down since it reported a decline in its second quarter earnings and provided a disappointing outlook for 2013. The earnings results had prompted the share price to drop as much as 13% to $33.4 on July 23.

To elaborate, despite a 17% year-over-year increase in revenues to $130 million in the second quarter, iRobot reported a 19% drop in its adjusted earnings to 21 cents per share. Increase in cost of revenue and operating expenses led to the decline even though its Home Robot business delivered strong results both domestically and overseas.

iRobot expects revenues to lie in the range of $124 to $128 million in the third quarter of 2013 and earnings per share to lie between 20 to 25 cents. For 2013, iRobot maintained its revenue guidance in the range of $485 to $495 million, reflecting 11% to 13% increase from 2012.

However, the company tweaked the lower end of its earnings guidance from the prior 80 cents-$1 per share to 88 cents to $1 a share. This includes the one-time tax benefit in the second quarter. So, on an adjusted basis, guidance remains the same. Earnings are expected to climb in the range of 31% to 64% over the 2012 earnings of 61 cents.

Investors were disappointed with the guidance, leading to the dismal share performance. iRobot is also facing the heat from competitors who are coming up with cheaper alternatives. Apart from cost, technological development and convenience are also the other differential factors. iRobot’s award-winning iRobot “Roomba”  has dominated the robot vacuum market for a long time.

However, well known manufacturers such as Philips (PHG - Analyst Report), Samsung Electronics Co. Ltd. (SSNLF), ASUSTeK Computer, Inc. and Micro-Star International are introducing new generation of vacuum robots with smart mapping capabilities. Samsung’s Navibot vacuums is a formidable competitor for Roomba, which, even though more expensive, is equipped with advanced navigation features.

iRobot also faces competition on the military front.  iRobot’s bomb-disposal robots is pitted against British rival, QinetiQ, Turkey's biggest defense contractor, Aselsan. Northrop Grumman Corp. (NOC - Analyst Report) officially launched its CUTLASS unmanned ground vehicle, and plans to expand it internationally. This might be a heavy blow to iRobot. Furthermore, a cut in defense spending will also affect iRobot’s revenues.

iRobot holds a Zacks Rank #1 (Strong Buy).

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