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Earnings: 2 Hot Stocks to Watch Next Week

Daniel Sparks, The Motley Fool

As earnings season kicked into gear, Netflix stole the show this week, posting surging revenue and smashing its own guidance for subscriber growth. The optimistic report from management on Netflix's business sent shares 10% higher. 

Next week will feature a range of earnings reports. But two of the most interesting will be quarterly updates from consumer household robot maker iRobot (NASDAQ: IRBT) and social network Facebook (NASDAQ: FB). Ahead of their earnings releases, here's a preview of what to watch.

iRobot Roomba 980 cleaning carpet in a home

iRobot Roomba 980. Image source: iRobot.

iRobot

Of these two companies, iRobot is scheduled to report its earnings first. The maker of the popular Roomba vacuum is scheduled to report its first-quarter results on Tuesday. 

In the fourth quarter, iRobot posted record fourth-quarter revenue of $327 million, up an impressive 54% compared to the year-ago period. The growth marked an acceleration compared to full-year revenue growth of 34%. Operating income also increased, rising from $18.7 million in the fourth quarter of 2016 to $23.1 million in Q4 2017.

But there's more strong growth in front of the company, according to management. iRobot is optimistic about the "tremendous" opportunity ahead. "Global household penetration of robotic vacuum cleaners remains extremely low, in the single digits," said iRobot CEO Colin Angle in the company's fourth-quarter earnings release. "Strong economic conditions worldwide are fueling overall global growth and positive consumer sentiment."

With management guiding for 2018 revenue to rise about 20% compared to 2017, based on the midpoint of the forecast range, investors should look for first-quarter revenue growth to handily exceed this growth rate. A first-quarter revenue growth rate beyond management's expected full-year pace would leave more room for revenue growth to decelerate as the year goes on.

Facebook

Following iRobot, Facebook reports its first-quarter results on Wednesday. As usual, the bar is high for Facebook. In Facebook's fourth quarter, revenue climbed 47% and adjusted earnings per share surged 83%. In addition, Facebook's user base grew to 2.1 billion people using it every month and 1.4 billion people using it daily. The results capped off a year of excellent financial performance.

Facebook CEO Mark Zuckerberg presents 10-year plan at F8 conference in 2016

Facebook CEO Mark Zuckerberg. Image source: Facebook.

But Facebook also admitted during the last earnings call that 2017 "was also a hard year" in some ways. "We've seen abuse on our platform, including interference from nation states, the spread of news that is false, sensational and polarizing, and debate about the utility of social media," said Facebook CEO Mark Zuckerberg in the company's fourth-quarter earnings call. Problems were exacerbated in March when Facebook announced that a third-party developer had mishandled user data.

In 2018, Facebook will most likely try to renew user and advertiser confidence. Beyond looking for more strong revenue growth, look for Facebook to comment on how recent developments will impact its guidance for spending on security and safety.

iRobot will report its fourth-quarter results after market close on Tuesday, April 24. And the consumer robot company will host a conference call to discuss the results on Wednesday morning, at 8:30 a.m. EDT. Facebook reports its fourth-quarter earnings after market close on Wednesday, April 25, hosting its quarterly conference call shortly after at 2 p.m. PDT.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook, iRobot, and Netflix. The Motley Fool has a disclosure policy.