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Why Is iRobot (IRBT) Up 12.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for iRobot (IRBT - Free Report) . Shares have added about 12.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is iRobot due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

iRobot Beats on Q3 Earnings, ’18 EPS & Sales View Up

iRobot (IRBT - Free Report) reported better-than-expected results for third-quarter 2018.

Earnings/Revenues

Quarterly adjusted earnings came in at $1.12 per share, handily outpacing the Zacks Consensus Estimate of 44 cents. Also, the bottom line came in higher than the year-ago tally of 76 cents per share.

Revenues in the quarter came in at $264.5 million, beating the Zacks Consensus Estimate of $244 million. The top-line figure also improved 28.8% year over year, on the back of stronger sales secured from all end-markets.

Costs/Margins

Cost of sales in the reported quarter was $129.3 million, up 25.5% year over year.  Gross margin was 51.1%, up 130 basis points (bps) year over year.

Total operating expenses in the reported quarter was $97.9 million, up 24.8% year over year. Operating margin was 14.1%, up 250 bps year over year.

Balance Sheet/Cash Flow

Exiting the third quarter, iRobot had cash and cash equivalents of $100.1 million, down from $128.6 million recorded as of Dec 30, 2017. Long-term liabilities came in at $14.7 million, down from $23.5 million reported at the end of 2017.

In the first nine months of 2018, iRobot generated $40.3 million cash from operating activities, down from $51.1 million recorded in the year-ago period. Capital expenditure was $25.3 million compared to $16.6 million witnessed at the end of third-quarter 2017.

Outlook

iRobot believes higher sales of its state-of-the-art home-robotic products and ongoing marketing programs will aid in boosting the company’s competency in the near future. Based on the existing market conditions, the company has raised its revenue guidance for 2018 from $1.06-$1.08 billion to $1.08-$1.09 billion (estimating a year-over-year growth rate of 22-23%). In addition to this, the company has also lifted its earnings view for the year from $2.30-$2.50 per share to $2.55-$2.75 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -43.77% due to these changes.

VGM Scores

At this time, iRobot has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, iRobot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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