Shares of iRobot Corporation (IRBT Quick QuoteIRBT - Free Report) have gained sharply since the beginning of 2020. We believe that the share price increase primarily reflects the growing demand for the company’s products and the healthy expectation for the second quarter and the second half of 2020.

The Bedford, MA-based company belongs to the Zacks Industrial Automation and Robotics industry, which, in turn, comes under the ambit of the Zacks Industrial Products sector.

Year to date, iRobot’s shares have surged 65.4% compared with the industry’s growth of 5.5% and against the sector’s fall of 12.6%. Notably, the S&P 500 has declined 2.7% during the same period.

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Factors Influencing the Stock

So far in 2020, iRobot has reported results for fourth-quarter 2019, with an earnings beat of 66.67%, and for first-quarter 2020, delivering positive earnings surprise of 4.48%. It is worth mentioning here that revenues in the first quarter exceed the company’s projection of $175-$185 million and also the Zacks Consensus Estimate by 7%. However, on a year-over-year basis, the coronavirus outbreak had adverse impacts on its manufacturing supply chain and sales activities.

In addition to better-than-expected results, we believe that iRobot’s predictions for the second half of 2020 and the second quarter might have supported the price surge so far. To elaborate, the company expects that its performance in the second half will be better than the first half. This belief stems from healthy sell-through — from the starting of 2020 till May — recorded in the United States. Also, the metric was positive in EMEA, while some improvement was recorded in Japan.

It also lifted its projections for the second quarter on the back of healthy demand for its Roomba i7 and s9 Series robot vacuums, and Braava jet m Series robot mops. Revenues in the quarter are predicted to be $260-$270 million, suggesting a rise from $193 million generated in the first quarter. Notably, the expectation of sequential growth is better than the company’s previously mentioned modest sequential decline.
 
To add, its innovative capabilities, cost-saving efforts to deal with the pandemic-related woes and diversified product offerings are likely to aid. Further, a healthy balance sheet and growing awareness about the company’s products are other tailwinds. Also, gross margin benefits might be realized going forward as its Roomba products are excluded from tariffs imposed under section 301.

Currently, the Zacks Consensus Estimate for the company’s earnings is pegged at $1.37 for 2020 and $2.59 for 2021, marking increases of 124.6% and 40.8% from the respective 60-day-ago figures. Notably, there were five upward revisions and one downward revision for both 2020 and 2021 in the past 60 days.

Also, earnings estimates for the second quarter have improved from a loss of 2 cents per share to earnings of 4 cents per share in the past two months. Such an upward revision in earnings estimates is reflective of bullish sentiments for the company.

iRobot Corporation Price and Consensus