IRobot (IRBT) To Report Q3 Earnings: What's In The Offing?

iRobot Corporation (NASDAQ:IRBT) is scheduled to report third-quarter 2017 results after the market closes on Oct 24.

In the past year, iRobot’s shares yielded a return of 70%, outperforming 48.3% growth recorded by the industry.

Over the trailing four quarters, the company recorded a remarkable average positive earnings surprise of 100.08%.

Let’s see how things are shaping up prior to this announcement.

Existing Scenario

iRobot believes sturdy demand for premium home robotic products (such as Roomba 800 and Roomba 900) as well as stronger sales of wet floor care robotic products (such as Braava jet) will likely bolster its top-line performance in the quarters ahead. Moreover, stronger market penetration of newly launched products (such as wi-fi enabled Roomba 890 and 690 robots) is anticipated to drive revenue growth. Notably, the company believes its ongoing marketing programs will continue to support the revenue growth trajectory in the to-be-reported quarter.

The company also expects that wider margins, discrete tax benefit and higher revenues will likely drive its bottom-line performance in this quarter.

However, we expect that the benefits generated by the aforementioned growth drivers might be offset by certain headwinds prevalent in the market.

Almost all the contract manufacturers of iRobot’s home robotic products belong to China. The company might face severe supply-chain challenges if these dealers suddenly terminate their contract with the company or fail to offer good quality products on time.

Furthermore, a stronger U.S. dollar, sudden input price inflation or extensive industry rivalry might dent the company’s revenues and profitability in the quarter to be reported.

Earnings Whispers

Our proven model does not conclusively show that iRobot will likely beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. That is not the case here as we will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: iRobot currently has an Earnings ESP of -4.55%. This is because the Most Accurate estimate is pegged at 42 cents per share, while the Zacks Consensus Estimate is pegged higher at 44 cents.

Zacks Rank: iRobot carries a Zacks Rank #3, which when combined with a negative ESP, makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are a few stocks that you may want to consider, as our model shows that they have the right combination of elements to report a positive surprise this quarter:

Alcoa Corp (NYSE:AA) , with an Earnings ESP of +9.55% and a Zacks Rank #1.

Altra Industrial Motion Corp. (NASDAQ:AIMC) , with an Earnings ESP of +7.10% and a Zacks Rank #2.

Smith (A.O.) Corporation (NYSE:AOS) , with an Earnings ESP of +0.11% and a Zacks Rank #2.

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