IRobot (IRBT) Beats On Q3 Earnings, Raises 2016 Outlook

iRobot Corporation (NASDAQ:IRBT) reported robust third-quarter 2016 results. Quarterly earnings and revenues both surpassed the respective Zacks Consensus Estimates and the year-ago tallies. The remarkable year-over-year improvement was experienced on the back of benefits generated from iRobot’s sound marketing programs and increased demand for home robotic products in the U.S., China and other international niche markets.

The company’s quarterly adjusted earnings of 70 cents per share comfortably surpassed the Zacks Consensus Estimate and were higher than the year-ago tally of 42 cents per share.

Inside the Headlines

During the quarter, revenues increased 17.4% year over year to $168.6 million. The top line exceeded the Zacks Consensus Estimate of $157 million.

iRobot’s gross margin for the quarter was 48.1%, down 50 basis points (bps) year over year.

The company’s third-quarter operating expenses were up 4.7% year over year to $53.6 million.

Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the quarter came in at $35.5 million compared with $25.9 million in the prior-year quarter.

Quarter in Detail

Consumer segment’s revenues during the quarter came in at $168 million, up 23% year over year.

Gross margin was 51.3%, down 140 bps. Units shipped totaled 779,000, up from 582,000 in the year-ago quarter.

On Apr 4, 2016, iRobot successfully completed the divestiture of its Defense & Security business to focus solely on its Home Robotics business.

Balance Sheet and Cash Flow

iRobot exited the quarter under review with cash and cash equivalents of $164.6 million, down 8.5% year over year. Long-term liabilities were $4.2 million compared with $7.7 million at the end of 2015.

At the end of the quarter, iRobot generated net cash of $67 million from operating activities as against $20 million generated in the year-ago comparable period. Capital expenditure was $8.4 million compared with $7.6 million in the year-ago period.

Outlook

iRobot projects earnings in the range of 36–44 cents and revenues in $202–$207 million band for the fourth quarter. The company has raised its full-year 2016 earnings and revenue guidance.

Full-year earnings are now expected in the range of $1.36–$1.44 per share as against the previously estimated range of $1.26–$1.40 per share. Revenues for 2016 are anticipated in the range of $650-$655 million as against the previous projection of $640–$645 million.

The outlook has been revised upward after considering the company’s Consumer segments’ business growth and marketing program benefits.

Zacks Rank and Other Stocks

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

Some better-ranked stocks within the industry that warrant a look include:

Allegion Plc (NYSE:ALLE) currently carries a Zacks Rank #2 (Buy) and has an average positive earnings surprise of 11.57% over the four trailing quarters.

Apogee Enterprises, Inc. (NASDAQ:APOG) currently carries a Zacks Rank #2 and has an average positive earnings surprise of 13.56% over the last four quarters.

Avery Dennison Corp. (NYSE:AVY) currently carries a Zacks Rank #2 and has an average positive earnings surprise of 7.44% over the trailing four quarters.

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