iRobot Poised on Solid Demand in Key Markets Amid Risks

On Apr 10, we issued an updated research report on iRobot Corporation IRBT.

Over the past three months, this Zacks Rank #3 (Hold) stock has yielded a return of 41.2% compared with industry’s rally of 22%.



Existing Scenario

iRobot believes robust sales of its products like Roomba e5 and Roomba i7 in the overseas end markets, along with i7/i7+ Roomba sales will continue to drive its near-term revenues. The company expects stronger revenues, reduced corporate tax rates and continued operational excellence to benefit its bottom line in the quarters ahead. Notably, the company anticipates generating revenues in the range of $1.28-$1.31 billion (estimating a year-over-year growth rate of 17-20%) in 2019.

Also, iRobot is raising global household adoption rates of its Roomba and Braava products through sales and marketing programs. Notably, for 2019, the company aims to raise Braava revenues to 10% of its total revenues through promotions. It believes that marketing investments will continue to drive its top line in the quarters ahead.  

Moreover, the company announced an increase to its existing revolving credit facility (in July 2018) from $90 million to $150 million, and extended its term to 2023, which will allow it to execute growth strategy. Notably, the new revolving line of credit facility will provide the company with greater financial flexibility for strategic acquisitions as well as future marketing and product innovation programs.

However, iRobot conducts its business in a highly competitive market. For instance, excessive business rivalry in the U.S. robotic vacuum cleaning market might hurt its revenues.

In addition, the company expects to incur $20 million to $25 million of tariff costs in 2019 on account of the implementation of the September tariffs at 10% level.

Stocks to Consider

Some better-ranked stocks from Zacks Industrial Products sector are DXP Enterprises, Inc. DXPE, Actuant Corporation ATU and Brady Corporation BRC. While DXP Enterprises sports a Zacks Rank #1 (Strong Buy), Actuant and Brady carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DXP Enterprises delivered average positive earnings surprise of 46.55% in the trailing four reported quarters.

Actuant pulled off average positive earnings surprise of 11.01% in the last four quarters.

Brady delivered average positive earnings surprise of 5.71% in the trailing 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.