IRobot Fortifies Business In Europe With Robopolis Buyout

iRobot Corporation (NASDAQ:IRBT) fortified its European business by successfully acquiring the company’s largest distributor in the continent — Robopolis SAS (Robopolis) — for $141 million.The final buyout price of the deal, currently subject to preliminary adjustments, will likely be settled by first-quarter 2018.

Shares of this Zacks Rank #3 (Hold) company have yielded a return of 20.2% in the last six months, outperforming 15.3% growth recorded by the industry.

Notably, the company’s earnings are anticipated to grow nearly 20% in the next three to five years.

Inside the Headlines

Robopolis is a Lyon, France-based distributor of premium personal robots. Being the primary distributer, the company generated approximately half of iRobot’s Europe, Middle East and African (EMEA) revenues in 2016.

iRobot noted that the Robopolis buyout will further strengthen its control over European end markets. This, in turn, is likely to enhance the market penetration of iRobot’s robotic vacuum cleaners in Europe.

Almost 25% of iRobot’s consumer business revenues in 2016 were generated from the EMEA region. We believe the aforementioned buyout will further boost this proportion, in the near future.

Our Take

iRobot is poised to grow on the back of strong innovation, sturdy hold on proprietary rights, elevated sales and strategic inorganic moves. On Jul 25, management raised its revenue guidance for full-year 2017 from $780-$790 million to $815-$825 million. Also, the company’s full-year earnings guidance has been revised upward from $1.45-$1.70 per share to the $1.80-$2.00 per share range.

However, we believe dynamic nature of the technology market, stiff industry rivalry and huge dependence on single-source contract manufacturers might curb iRobot’s near-term prospects.

Stocks to Consider

Better-ranked stocks in the same space are listed below:

AGCO Corporation (NYSE:AGCO) currently carries a Zacks Rank #2 (Buy) and has an average positive earnings surprise of 39.70% for the last four quarters. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Applied Industrial Technologies, Inc. (NYSE:AIT) also carries a Zacks Rank #2 and has an average positive earnings surprise of 10.10% for the trailing four quarters.

Alamo Group, Inc. (NYSE:ALG) , which carries a Zacks Rank #2 at present, generated an average positive earnings surprise of 0.51% during the same time frame.

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