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Will Tariffs, Weak Margins Hurt iRobot (IRBT) in Q3 Earnings?

Zacks Equity Research

iRobot Corporation IRBT is scheduled to release third-quarter 2019 results on Oct 22, after the market closes.

The company delivered impressive results in the last four quarters, beating estimates on all occasions. Average earnings surprise was a positive 248.44%. Notably, in the last reported quarter, its earnings of 25 cents per share surpassed the Zacks Consensus Estimate of 3 cents by 733.33%.

In the past three months, shares of the industrial robot maker have dipped 35.9% compared with the industry’s decline of 2.4%.





Let us see how things are shaping up for iRobot this earnings season.

Factors to Affect Q3 Results

Tariffs are the biggest threats to iRobot. In 2019, the U.S. government imposed a tariff rate of 25% on products imported from China, including robotic vacuum cleaners manufactured in Beijing. The rate was higher than 10% implemented in September 2018. The impact of higher tariffs is expected to reflect in order activities of some major retailers (including Amazon) of iRobot. This is also likely to have affected the company’s top line in the third quarter.

iRobot expects third-quarter revenues to be below the year-ago quarter’s reported figure. Domestic operations are likely to be moderate while growth is predicted to be healthy internationally.
 
In addition, the rise in promotional and pricing activities in EMEA as well as manufacturing diversification, impacts of product launches and tariff-related woes are likely to have adversely influenced gross margin in the third quarter. The company expects gross margin to remain flat sequentially in the quarter under review.

The Zack Consensus Estimate for the company’s earnings per share is pegged at 55 cents, indicating a decline of 51.8% from the year-ago quarter’s reported figure. Also, the consensus estimate for revenues suggests a 1.5% fall from the year-ago quarter’s reported figure.

Earnings Whispers

Our proven model doesn’t conclusively predict an earnings beat for iRobot this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: iRobot has an Earnings ESP of -4.06% as the Most Accurate Estimate of 52 cents is below the Zacks Consensus Estimate of 54 cents.

iRobot Corporation Price and Consensus

 

iRobot Corporation Price and Consensus

iRobot Corporation price-consensus-chart | iRobot Corporation Quote

Zacks Rank: The company currently carries a Zacks Rank #5 (Strong Sell).

Stocks to Consider

Here are some companies in the Zacks Industrial Products sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter, according to our model.

Graphic Packaging Holding Company GPK presently has an Earnings ESP of +8.53% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

W.W. Grainger, Inc GWW currently has an Earnings ESP of +0.53% and a Zacks Rank #3.

Sealed Air Corporation SEE has an Earnings ESP of +2.40% and a Zacks Rank #3 at present.

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