iRobot Corporation IRBT is scheduled to report first-quarter 2015 results after the opening bell on Apr 21, 2015. Over the last four trailing quarters, the company generated a positive average earnings surprise of 15.32%. iRobot aims to fortify its operations with the help of improved Home Robotics business.. However, currency devaluation and economic slowdown in major foreign markets raise concerns for the stock. Let’s see how things are shaping up prior to this announcement.
Factors to Influence Q1 Results
iRobot is a premium consumer goods firm, sharing a high brand value in the market. The company intends to increase its market share and boost strength on the back of three growth pillars, namely, creation of superior robots, attainment of greater operational performance and implementation of premium advertisement campaigns.
iRobot expects its Home Robotics business to grow 10–12% by the end of the current year, comprising almost 90% of its aggregate revenues.
However, the surplus generated by its efficient market development as well as penetration strategies might be offset by certain headwind-related issues.
iRobot’s revenues are affected by currency fluctuations as the company sells its products to foreign distributors in terms of dollar. Since Jul 2014, the U.S. dollar has been strengthening with respect to several major currencies such as European Euro or Japanese Yen, and this is exerting pricing pressure on iRobot’s foreign distributors. Such pressure will, in turn, lower their investment ability, thereby hampering the company’s revenue growth in the to-be-reported quarter.
Also, demand and marketing activities for iRobots’ products have been deteriorating over time in Japan. Prolonged currency devaluation of Japanese Yen and persistent recessionary trails in its markets are mainly responsible for this weakness in demand. Poor business in Japan is anticipated to lower the company’s top-and bottom-line values in first-quarter 2015.
Moreover, iRobot’s business is exposed to intense market competition. Strategic initiatives of its potential rivals might reduce the company’s market demand as well share, and subsequently, sales. For instance, the company’s number of competitors in the traditional vacuum cleaner market has been increasing significantly over time.
Considering the unfavorable macroeconomic situation in Japan, iRobot projects to earn revenues within $114–$117 million in first-quarter 2015, driven by a marginal year-over-year increment in top-line values. The company also expects adjusted earnings within 8–10 cents and adjusted EBITDA in a range of $10–$11 million in to-be-reported quarter.
Earnings Whispers: Our proven model does not conclusively show that iRobot is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. That is not the case here as we will see below.
Zacks ESP: iRobot currently has an Earnings ESP of 0.00%. This is because the Zacks Consensus Estimate of 10 cents stands in line with the Most Accurate Estimate.
Zacks Rank: iRobot’s Zacks Rank #4, when combined with a 0.00% ESP, makes surprise predictions inconclusive.
Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
AMC Networks Inc. AMCX, with an Earnings ESP of +17.42% and a Zacks Rank #1.
Columbia Sportswear Company COLM, with an Earnings ESP of +5.71% and a Zacks Rank #1.
Skullcandy, Inc. SKUL, with an Earnings ESP of +7.69% and a Zacks Rank #1.
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