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iRobot (IRBT) Tops Q4 Earnings & Revenues; Outlook Positive

Premium consumer technology company, iRobot CorporationIRBT reported better-than-expected fourth-quarter 2016 results.

Over the last three months, iRobot's shares recorded a return of 7.27% - outperforming 6.44% return provided by the Zacks categorized Machinery industry.

Inside the Headlines

The company's quarterly adjusted earnings of 49 cents per share comfortably surpassed the Zacks Consensus Estimate of 39 cents, but fell short of the year-ago tally of 65 cents per share. The company stated that earnings declined year over year due to the divestiture of the Defense & Security business in Apr 2016.

Full-year 2016 earnings came in at $1.48 per share, a penny lower than the value recorded in the year-ago tally.

During the quarter, revenues climbed 2.9% year over year to $212.5 million. The top line also exceeded the Zacks Consensus Estimate of $206 million.

iRobot's gross margin for the quarter was 50.2%, up 400 basis points (bps) year over year.

The company's fourth-quarter operating expenses were up 21.6% year over year to $87.9 million.

Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") for the quarter came in at $28.6 million compared with $35 million in the prior-year quarter.

Revenues for full-year 2016 were $660.6 million, as against $616.8 million recorded at the end of 2015. Despite stiff market competition, iRobot's stellar top-line performance was driven by robust sales accrued from the U.S. Increased demand for home robotic products, such as Braava jet, and productive marketing strategies drove demand for the company's products in the U.S.

Full-year adjusted EBITDA was $94.4 million, up 2.6% year over year.

Segmental Information

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

In fourth-quarter 2016, the company's Consumer business generated revenues worth $212.1 million, up 21.1% year over year. Notably, domestic sales during the quarter were roughly $124 million and international sales accounted for the remaining.

Total units shipped was 940,000, up from 771,000 shipped in fourth-quarter 2015.

Balance Sheet and Cash Flow

iRobot exited the quarter under review with cash and cash equivalents of $214.5 million, up from $170.5 million recorded on Jan 2, 2016. Long-term liabilities were $6.3 million compared with $7.7 million at the end of 2015.

At the end of 2016, iRobot generated net cash of $116.4 million from operating activities as against $26.7 million generated at the end of 2015. Capital expenditure was $10.8 million on Dec 31, 2016, compared to $9.4 million at the end of 2015.

Outlook

iRobot anticipates generating solid revenues in 2017 on the back of increased sales of the Roomba robot in the U.S., higher demand for all home robotic products in the overseas market and impressive market response to the new wet floor category products. In addition, higher revenues and greater operational efficacy are likely to bolster profitability in the upcoming quarters.

The company expects to complete the acquisition of its Japanese distributor (Sales On Demand Corporation) by the beginning of second-quarter 2017. This deal is likely to provide a positive revenue impact ($20-$25 million) in 2017.

Based on the existing market conditions, iRobot projects to generate revenues within the range of $770-$785 million (year-over-year growth of 17%-19%) and earnings within the $1.35-$1.65 million band in 2017.

Why a Poor Zacks Rank?

iRobot currently carries a Zacks Rank #5 (Strong Sell). Notably, the Zacks Consensus Estimate for the stock has also moved south by 4.5% to $1.69 for 2017. The company recently divested its Defense & Security business for becoming a pure play consumer technology company. However, the post spin-off profit making prospects of the company still remain ambiguous.

Moreover, headwinds such as a stronger U.S. dollar or extensive business rivalry might weigh over revenues and margins in the to-be-reported quarters.

Stocks that Warrant a Look

Some better-ranked stocks within the industry are listed below:

ABB Ltd ABB has an average earnings surprise of 23.50% for the past four quarters and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Altra Industrial Motion Corp. AIMC also flaunts a Zacks Rank #1 and has an average earnings surprise of 8.06% for the trailing four quarters.

Applied Industrial Technologies, Inc. AIT currently holds a Zacks Rank #2 (Buy) and has an average earnings surprise of 6.18% for the last four quarters.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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