IRobot's (IRBT) Products & Marketing Moves Aid, Tariffs Hurt

We have issued an updated research report on iRobot Corporation (NASDAQ:IRBT) on Oct 1.

The industrial robot maker has many tailwinds and headwinds impacting its performance.

A brief discussion of the various factors has been mentioned below.

A well-diversified product portfolio and effective marketing strategies (including television advertising campaign, trade shows and others) are iRobot’s biggest advantages. Its Braava Mops, Roomba Vacuums and Terra Mows have been well accepted in the domestic and international markets. Particularly, product demands are high in EMEA and Japan among other foreign countries. In addition, the company’s efforts to expand manufacturing capabilities outside China will likely be a boon in the quarters ahead.

Also, innovation is useful in building opportunities. In second-quarter 2019, iRobot included two products — Roomba s9+ robot vacuum and Braava jet m6 robot mop — to its portfolio. Notably, Braava jet m6 robot mop has Imprint Smart Mapping and iAdapt Navigation, with vSLAM technologies, while Roomba s9+ robot vacuum is equipped with PerfectEdge, iAdapt Navigation with Imprint Smart Mapping and Clean Base Automatic Dirt Disposal technologies. For 2019, the company believes that new products (including i7 and i7+) will constitute roughly 15% of revenues.

Despite the above-mentioned tailwinds and favorable trends with the industry (i.e. growing use of robotic technologies for household chores and other purposes); iRobot’s biggest threat comes from tariffs. The imposition of 25% tariffs on China imports (including robotic vacuum cleaners manufactured in Beijing) is putting additional burden on the company’s revenues and earnings. For 2019, its tariff-related costs are predicted to be $35-$40 million, up from the previously mentioned $20-25 million.

For the third quarter of 2019, the company believes that higher tariffs will adversely impact order activities of some major retailers (including Amazon (NASDAQ:AMZN)). Further, costs related to product marketing and development as well as pricing activities in EMEA will likely have an adverse impact on margins in the year.

For 2019, iRobot revised down its earnings projections from $3.15-$3.40 to $2.40-$3.15. Revenues are predicted to be $1.2-$1.25 billion compared with the previously mentioned $1.28-$1.31 billion.

Furthermore, the company faces competition from other players in the industry, including Hollysys Automation Technologies Ltd. (NASDAQ:HOLI) , FANUC Corporation (OTC:FANUY) and Rockwell Automation, Inc. (NYSE:ROK) .

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