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Bull of the Day: iRobot (IRBT)

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Shares of iRobot (IRBT - Free Report) have plummeted roughly 22% since the company reported mixed first-quarter fiscal 2019 financial results on April 23. Despite the recent drop-off, the household robot maker’s top-line outlook appears strong and its longer-term earnings estimate revision picture has turned more positive following its Q1 earnings release. This means at least some analysts are more bullish on iRobot’s bottom line.  

Overview & Recent News

iRobot helped launch the home robot cleaning market with its Roomba robot vacuum all the way back in 2002. The Bedford, Massachusetts-based firm now offers three core products: its Roomba vacuums that start at $299.99, its Braava Robot mops that begin at $199.99, and its Mirra pool cleaners that start at $999.99. Investors should also note that iRobot is preparing to launch two new products during the second quarter.

What’s more, the firm is set to introduce a new category of robot later this year. The brand-new Terra robot lawn mower could help the company attract a whole new segment of consumers. “With the launch of two new products in the second quarter, along with the Terra launch later this year, we will have introduced five major new products in the past 12 months,” founder and CEO Colin Angle said on the company’s earnings call.

Looking ahead, the robotic vacuum firm said that it plans to slowly move production of some of its “more easy to build products” outside of China in an effort to combat tariffs and continued trade dispute worries. Executives noted that the efforts will help iRobot create long-term supply chain flexibility. For now, however, China will remain its production hub.   

Despite the innovations, a massive first-quarter earnings beat, and roughly 9.5% Q1 2019 revenue growth, IRBT stock has plummeted since the firm released its Q1 results. Much of the downturn can be attributed to its sales miss and its roughly 8% year-over-year adjusted earnings decline.

As we mentioned at the top, shares of iRobot have tumbled 22% since April 23. Nonetheless, shares of IRBT are still up approximately 22% this year and 75% in the past 12 months. And it seems that the post-Q1 selloff might be over for now, with IRBT shares showing signs of stability. iRobot saw its stock price pop nearly 2% during regular trading hours Monday to close at $101.95 per share.

We can also see that IRBT stock has crushed the Industrial Autonomous/Robotics Market’s—which includes Rockwell Automation (ROK - Free Report) and Hollysys Automation Technologies (HOLI - Free Report) —average over the last five years. This means now could be a time to think about buying iRobot stock on the dip.

 

 

Outlook & Earnings Trends

Moving on, the firm’s second-quarter 2019 revenue is projected to jump 21.5% to reach $275.06 million, based on our current Zacks Consensus Estimate. “From a quarterly perspective, we continue to expect year-over-year revenue growth rates to be the highest in Q2 and Q4, due in part to the anticipated timing of new product introductions and distribution rollout,” CFO Alison Dean said on the iRobot’s earnings call.

On top of that, iRobot’s current full-year sales are expected to reach $1.30 billion, which would mark a roughly 19% expansion. Peeking even further ahead, the firm’s fiscal 2020 revenues are projected to jump 16% above our 2019 estimate.

At the bottom end of the income statement, the company’s earnings are projected to slip in the second quarter and for the full year 2019. In fact, the company’s adjusted fiscal 2019 EPS figure is expected to sink roughly 21% from the year-ago period.

With that said, iRobot raised its full-year earnings guidance, driven, in part, by a favorable discrete tax impact. Plus, investors will notice that the company’s earnings estimate revision activity has surged since the company reported its Q1 results. We can see just how positive the movement has been for fiscal 2019 and 2020, which is often a sign of positive stock price movement to come.

 

 

Bottom Line

iRobot’s positive, longer-term earnings estimate revision activity helps it earn a Zacks Rank #1 (Strong Buy) right now. IRBT also sports “A” grades for Growth and Momentum in our Style Scores system. Along with that, iRobot is trading near its three-year low at 23.3X forward 12-month Zacks Consensus EPS estimates. Clearly, some of this value is driven by its recent selloff. Yet, its valuation picture has been solid over the last serval years amid its impressive climb.

In the end, iRobot is a company that stands to grow as part of the larger proliferation of the robotics industry and Internet of Things expansion that giants from Amazon (AMZN - Free Report) to Microsoft (MSFT - Free Report) hope to capitalize on.  

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