IRobot's (IRBT) Q3 Earnings Beat, Down Y/Y, Guidance Revised

Premium consumer technology company iRobot Corporation (NASDAQ:IRBT) reported mixed results for third-quarter 2017. Though quarterly earnings surpassed the Zacks Consensus Estimate, revenues fell short of the same.

Earnings and Revenues

Quarterly adjusted earnings came in at 60 cents per share, comfortably beating the Zacks Consensus Estimate of 44 cents. However, the bottom line came in lower than the year-ago tally of 70 cents per share.

Quarterly revenues came in at nearly $205.4 million, missing the Zacks Consensus Estimate of $207 million. Nevertheless, the top line came in much ahead of the year-ago tally of $168.6 million.

Domestic Consumer business sales in the quarter came in at $87.6 million, up 33.8% year over year. Also, the International Consumer business generated revenues of $117.7 million in the reported quarter, up 14.9% year over year.

Total units shipped in the quarter came in at 906,000, up from 779,000 shipped in third-quarter 2016.

Costs and Margins

Cost of sales in the reported quarter was $103 million, up 17.7% year over year. Gross profit margin in the reported quarter came in at 49.8%, expanding 170 basis points (bps) year over year.

Total operating expenses were $78.5 million, up 46.4% year over year. Operating margin came in at 11.6% compared with 16.3% recorded in the year-ago period.

Balance Sheet and Cash Flow

Exiting the third quarter, this Zacks Rank #3 (Hold) company had cash and cash equivalents of $241.8 million, up from $214.5 million recorded on Dec 31, 2016. Long-term liabilities were $8 million, up from $6.3 million recorded at the end of 2016.

In the first nine months of 2017, iRobot generated net cash of $51.1 million from operating activities as against $67 million generated in the year-earlier period. Capital expenditure was $16.6 million on Sep 30, 2017, compared to $8.4 million recorded at the end of third-quarter 2016.

Outlook

iRobot believes business growth in the United States as well as the Europe, the Middle East and African end-markets would boost its results in the to-be-reported quarter. The company also anticipates that deeper market penetration of its premium home robotic products in the U.S. households will likely drive its top-line performance. Henceforth, the company raised its revenue guidance for full-year 2017 from $815-$825 million to $870-$880 million (estimating a year-over-year increment of 33-34%). Nonetheless, the company trimmed the lower-end of its earnings guidance for 2017, considering the impact of the latest Robopolis acquisition (Oct 2, 2017). Earnings guidance for the current year has been revised to the $1.65-$2.00 per share range from the $1.80-$2.00 per share range, previously estimated.

Stocks to Consider

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

Altra Industrial Motion Corp. (NASDAQ:AIMC) has an average positive earnings surprise of 17.30% for the last four quarters and currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Allegion PLC (NYSE:ALLE) also holds a Zacks Rank of 2 and generated an average positive earnings surprise of 1.95% over the trailing four quarters.

A. O. Smith Corporation (NYSE:AOS) , another Zacks Rank #2 stock, pulled off an average positive earnings surprise of 3.25% during the same time frame.

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