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iRobot (IRBT) Down 5.8% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for iRobot (IRBT). Shares have lost about 5.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is iRobot due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

iRobot Q3 Earnings and Revenues Miss Estimates

iRobot reported disappointing third-quarter 2022 results. The company’s adjusted loss in the reported quarter was $2.08 per share, missing the Zacks Consensus Estimate of $1.16. The quarterly loss came against earnings of $1.59 per share recorded a year ago.

Revenue Details

iRobot generated revenues of $278.2 million in the reported quarter, lagging the Zacks Consensus Estimate of $450 million by 36.7%. On a year-over-year basis, revenues decreased 36.9% due to lower orders from retailers and distributors in North America and EMEA.

Sales derived from premium and mid-tier robots accounted for 76% of IRBT’s total robot revenues, lower than 86% in the year-ago quarter.

Sales generated from the e-commerce platform (representing 56% of the reported quarter’s revenues) decreased 41% year over year. The e-commerce platform includes online sources of retailers, IRBT’s app and website, as well as e-commerce websites. Direct sales to consumers were up 2% year over year to $41 million.

Total product units of 1,006 thousand shipped in the quarter reflected a year-over-year decrease of 34.8%, while average selling prices declined 2.5%. For vacuum products, revenues of $251 million reflected a decline of 36.9% from the year-ago quarter. Units shipped were 925 thousand, down 32.9% from the prior-year quarter. Revenues from mopping products decreased 37.2% to $27 million. Units shipped were 81 thousand, down from 164 thousand recorded in the year-ago quarter.

On a regional basis, iRobot sourced 52.9% of revenues from domestic operations and the rest came from the international arena. Domestic revenues totaled $147.1 million, reflecting a 32.1% decline from the year-ago quarter. International revenues declined 41.5% to $131.1 million.

Margin Profile

In the quarter under review, iRobot’s cost of revenues decreased 27.4% to $201.8 million, representing 72.5% of revenues compared with 63.1% in the year-ago quarter. Adjusted gross profit was $78.3 million, down 52% year over year, while the adjusted gross margin decreased 880 basis points to 28.2%.

Research and development expenses were $41.4 million, up 2.7% year over year. This accounted for 14.9% of revenues compared with 9.1% in the year-ago quarter. Selling and marketing expenses increased 2% to $60.3 million. As a percentage of revenues, it was 21.7% for the reported quarter compared with 13.4% in the prior-year period. General and administrative expenses were $31.5 million, up 38.8% year over year. The figure mirrored 11.3% of the total revenue base compared with 5.2% in the year-earlier quarter.

In the third quarter, iRobot recorded an adjusted operating loss of $34.5 million against the operating income of $48 million in the year-ago period. The adjusted operating margin was (12.4%) versus 10.9% in the year-ago quarter.

Balance Sheet and Cash Flow

While exiting third-quarter 2022, iRobot had cash and cash equivalents of $89.6 million, decreasing 55.5% from $201.5 million recorded at the end of fourth-quarter 2021. Total long-term liabilities were $56.1 million, down 22.1% from the figure recorded at the end of fourth-quarter 2021.

In the first nine months of 2022, iRobot used net cash of $212.6 million for operating activities compared with net cash of $90.8 million used in the prior-year period. Capital used for purchasing property and equipment totaled $8.9 million, decreasing 64.8%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -128.7% due to these changes.

VGM Scores

Currently, iRobot has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise iRobot has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

iRobot belongs to the Zacks Industrial Automation and Robotics industry. Another stock from the same industry, Rockwell Automation (ROK), has gained 0.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

Rockwell Automation reported revenues of $2.13 billion in the last reported quarter, representing a year-over-year change of +17.6%. EPS of $3.04 for the same period compares with $2.33 a year ago.

Rockwell Automation is expected to post earnings of $1.76 per share for the current quarter, representing a year-over-year change of -17.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -4.7%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Rockwell Automation. Also, the stock has a VGM Score of C.

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