Back to top

Bear of the Day: iRobot (IRBT)

Read MoreHide Full Article

Consumer technology company iRobot (IRBT - Free Report) , the $2 billion maker of the Roomba vacuum, reported strong fourth-quarter 2017 results that beat the Zacks profit estimate by over 100%.

But the 2018 outlook was equally shocking in the other direction and shares plummeted over 30% when the company reported ten days ago. More on the outlook coming up.

Quarter Details

Adjusted earnings during the quarter came in at 54 cents per share, beating the Zacks Consensus Estimate of 26 cents. The bottom line also surpassed the year-ago tally of 49 cents per share.

Quarterly revenues came in at $326.9 million, outpacing the Zacks Consensus Estimate of $317 million. The top line also came in 53.8% higher than the year-earlier tally. The upside stemmed from robust sales in all global regions.

For the full year, the company generated $883.9 million in revenues for 2017, higher than $660.6 million recorded in 2016 and representing strong annual sales growth of 34%.

More Than Vacuums

iRobot's product line, including the Roomba and the Braava family of mopping robots, feature proprietary technologies and advanced concepts in cleaning, mapping and navigation. iRobot's engineers are building an ecosystem of robots and data to enable the smart home.

The company has developed some of the world's most important robots, and has a rich history steeped in innovation. Its robots have revealed mysteries of the Great Pyramid of Giza, found harmful subsea oil in the Gulf of Mexico, and saved thousands of lives in areas of conflict and crisis around the globe.

Company Outlook

iRobot believes improving global economic conditions and upbeat consumer sentiments will drive demand for its premium home-robotic products in the quarters ahead. In addition, the company’s marketing programs and the Robopolis buyout (October 2017) will assist in boosting its top and bottom-line growth trajectory.

Based on the existing market conditions, iRobot anticipates to generate revenues in the range of $1.05-$1.08 billion and earnings in the band of $2.10-$2.35 per share in 2018.

By 2020, iRobot intends to secure revenue growth of roughly 20%, gross margin growth of 50-51% and operating margin growth of nearly 10%.

But this slow-down in growth estimates is clearly not what investors were expecting.

Analyst Reaction

Since the company's report, analysts have lowered their profit projections for the full-year 2018 from $2.77 to the new Zacks Consensus of $2.32, a 16% drop.

And even next year's EPS forecast took a bit hit, falling 17.5% from $3.48 to $2.87.

These moves pushed the stock into the cellar of the Zacks Rank.

Granted, this year's EPS growth is still expected to be above 30% and the top line comes in above 20%.

So it's very possible that investor expectations for growth had gotten ahead of themselves after a strong 2017.

Whatever the disconnect, it's time to stand aside in IRBT until the estimates start heading back up. The Zacks Rank will let you know.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

iRobot Corporation (IRBT) - free report >>

More from Zacks Bear of the Day

You May Like