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Why Is iRobot (IRBT) Up 26.7% Since Last Earnings Report?

It has been about a month since the last earnings report for iRobot (IRBT). Shares have added about 26.7% in that time frame, outperforming the S&P 500.

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

iRobot Reports Q3 Net Loss, Revenues Down 7.4% Y/Y

iRobot reported third-quarter 2023 adjusted loss of $1.82 per share. The quarterly loss compares unfavorably with the year-ago quarter’s number.

Revenue Details

iRobot generated revenues of $186.2 million in the reported quarter, beating the Zacks Consensus Estimate of $259 million. On a year-over-year basis, revenues decreased 33.1% due to the low product availability of new products.

Sales derived from premium and mid-tier robots accounted for 81% of IRBT’s total robot revenues, higher than 76% in the year-ago quarter.

Sales generated from the e-commerce platform (representing 61% of the reported quarter’s revenues) decreased approximately 27% 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 down 8% year over year to $37 million.

Total product units of 627 thousand shipped in the quarter reflected a year-over-year decrease of 37.7%, while average selling prices increased 5.4%. For vacuum products, revenues of $172 million reflected a decline of 31.5% from the year-ago quarter. Units shipped were 585 thousand, down 36.8% from the prior-year quarter. Revenues from mopping products decreased 48.2% to $14 million. Units shipped were 42 thousand, down from 81 thousand recorded in the year-ago quarter.

On a regional basis, iRobot sourced 46.1% of revenues from domestic operations and the rest came from the international arena. Domestic revenues totaled $85.8 million, reflecting a 41.7% decline from the year-ago quarter. International revenues declined 31.7% to $100.4 million.

Margin Profile

In the quarter under review, iRobot’s cost of revenues decreased 31.5% to $138.2 million. Adjusted gross profit was $54.9 million, down 33.8% year over year, while the adjusted gross margin decreased 170 basis points to 26.5%.

Research and development expenses were $37.2 million, down 10.1% year over year. Selling and marketing expenses decreased 30.7% to $41.7 million. General and administrative expenses were $28.4 million, down 10% year over year.

In the third quarter, iRobot recorded an adjusted operating loss of $40.6 million compared with the adjusted operating loss of $34.5 million in the year-ago period. The adjusted operating margin was (21.8%) versus (12.4%) in the year-ago quarter.

Balance Sheet and Cash Flow

While exiting third-quarter 2023, iRobot had cash and cash equivalents of $189.6 million compared with $117.9 million recorded at the end of fourth-quarter 2022. Total long-term liabilities were $253.2 million compared with $63.5 million recorded at the end of fourth-quarter 2022.

In the first nine months of 2023, iRobot used net cash of $113.6 million for operating activities compared with net cash of $21.6 million used in the prior-year period. Capital used for purchasing property and equipment totaled $3.1 million, decreasing 67.8%.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

Currently, iRobot has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth 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

iRobot has a Zacks Rank #3 (Hold). We expect an in-line 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 8.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Rockwell Automation reported revenues of $2.56 billion in the last reported quarter, representing a year-over-year change of +20.5%. EPS of $3.64 for the same period compares with $3.04 a year ago.

Rockwell Automation is expected to post earnings of $2.61 per share for the current quarter, representing a year-over-year change of +6.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -2.6%.

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 B.

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