iRobot Corporation’s IRBT price performance has been impressive since the beginning of 2020. Its share price has witnessed a 50% surge so far this year. Growing demand for its products, focus on product innovation and an uptick in the e-commerce business supported positive market sentiments for the company.
The Bedford, MA-based company, with $2.1 billion of market capitalization, belongs to the Zacks Industrial Automation and Robotics industry. It currently carries a Zacks Rank #2 (Buy).
Year to date, iRobot has outperformed its industry’s growth of 5.9% and the S&P 500’s increase of 0.5%.
Factors Favoring the Stock
iRobot reported solid results so far this year, with earnings beat of 4.48% and 404.76% in the first and second quarters of 2020, respectively. Revenues in the first and second quarters exceeded the Zacks Consensus Estimate by 7% and 5.8%, respectively. Notably, in the second quarter, the results also fared well compared with the year-ago quarter. Moreover, the company remains optimistic about its top-line prospects for the second half of this year, with revenues projected to increase in mid-single digits on a year-over-year basis. We believe that the better-than-expected results, along with iRobot’s predictions for the second half of 2020 might have supported the price surge so far.
Also, the company has been benefiting from its diversified product portfolio over time. For instance, in second-quarter 2020, revenues procured from its premium robots (products with $500 or more as list price) grew 43% year over year and also constituted about 60% of total revenues. iRobot also stands to gain from its innovation capabilities and manufacturing diversification. It expects that solid demand for products like Roomba i7, Roomba s9 and Braava jet m6, along with strengthening sell-through and spur in the e-commerce business will act as tailwinds, going forward.
Moreover, iRobot’s cost-saving efforts through workforce reduction, suspension of certain marketing actions for Terra and others are likely to continue boosting margins in the upcoming quarters. For the second half of 2020, it expects gross margin to be 39-40%, while that for the year it is likely to be in low 40s.
In addition, analysts have become increasingly bullish about the company over the past couple of months. The Zacks Consensus Estimate for its earnings is pegged at $2.45 for 2020 and 90 cents for the third quarter of 2020, marking increases of 6.5% and 3.4% from the respective 60-day-ago figures. Notably, there were two upward revisions and no downward revision for both 2020 and 2021 in the past 60 days.
However, it is exposed to risks associated with stiff market competition, weak global demand and supply-chain woes on account of the coronavirus pandemic. Also, high operating costs and expenses related to investment in marketing campaigns pose headwinds.
Other Stocks to Consider
Some other top-ranked stocks from the Zacks Industrial Products sector are II-VI Incorporated IIVI, Enersys ENS and Regal Beloit Corporation RBC. While II-VI currently sports a Zacks Rank #1 (Strong Buy), Enersys and Regal Beloit carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
II-VI delivered a positive earnings surprise of 64.90%, on average, in the trailing four quarters.
Enersys delivered a positive earnings surprise of 5.20%, on average, in the trailing four quarters.
Regal Beloit delivered a positive earnings surprise of 18.91%, on average, in the trailing four quarters.
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