On Dec 9, 2015, Zacks Investment Research downgraded iRobot Corporation IRBT to a Zacks Rank #3 (Hold) from a Zacks Rank #2 (Buy). Going by the Zacks model, companies carrying a Zacks Rank #3 have chances of performing in line with the broader market over the upcoming quarters.
Why on Hold?
Expecting to reap benefits from improving Home Robots business in the U.S. and China, and growing global demand for Roomba robots, iRobot lately upgraded its full-year 2015 earnings guidance to a range of $1.35–$1.40 per share from the previous projection of $1.25–$1.35. The company anticipates improving its revenues on the back of tactical marketing strategies in the near future. Through innovative market penetration and development strategies, iRobot seeks to enhance the sales of its existing as well as new products, going ahead. Moreover, the company’s new senior vice president Tim Saeger is expected to drive further operational improvement in the second half of fiscal 2015.
However, in spite of the above positives, iRobot carries a Zacks Rank #3 (Hold) due to certain major issues in its business. Unfavorable spending pattern of the U.S. Federal government might significantly weigh on the top-line results of the company’s Defense and Security segment. Moreover, appreciation of the U.S. dollar is adversely affecting the company’s international revenues and earnings. At the same time, stiff industry rivalry exposes iRobot to risks of market share loss.
Stocks to Consider
Better-ranked stocks in the industry include HomeAway, Inc. AWAY, Belmond Ltd. BEL and Bright Horizons Family Solutions, Inc. BFAM. All three stocks hold a Zacks Rank #2 (Buy).
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