3 Things to Watch When iRobot Corporation Reports Earnings

By Markets Fool.com

It's that time again, iRobot Corporation investors! Your favorite robot maker is set to announce fourth-quarter results next Wednesday, Feb. 4. And with iRobot stock down slightly since its better-than-expected results in November, shareholders would be wise to consider how the company fared during the crucial holiday season.

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For perspective, iRobot did say its outperformance last quarter was mostly the result of several earlier-than-expected orders in both its Home Robot and Defense & Security businesses. Consequently, iRobot left intact its full-year guidance, and told investors to expect fourth-quarter revenue and earnings per share in the ranges of $158 million-$167 million and $0.26-$0.31, respectively. Analysts are relatively optimistic, then, in calling for revenue of $163.9 million, and earnings of $0.30 per share -- both above the midpoints of iRobot's ranges.

But iRobot's business is about more than just last quarter's revenue and earnings. So here are three other things I'll be watching in Wednesday's report.

Guidance is key
First, after iRobot gets the usual headline figures out of the way, all eyes will pivot toward its full-year guidance. Wall Street, for its part, is modeling 2015 revenue of $643.1 million, which would represent roughly 15% year-over-year growth if iRobot hits the middle of its expected 2014 range.Analysts also want to see 2015 earnings of $1.44, which would mean slightly higher 17.5% growth from the midpoint of iRobot's outlook.

But even if iRobot does turn in weaker-than-expected guidance, it certainly doesn't guarantee the stock will fall. Around this time last year, for example, iRobot stock initially plunged in after-hours trading as the market reacted to its light outlook, then jumped more than 12% the following day after iRobot management offered perspective during their subsequent conference call on the relative strength and youth of the home robot market. It also helped that iRobot not only beat expectations on both revenue and earnings that quarter, but has also demonstrated a tendency to underpromise and overdeliver on its preliminary full-year results.

Is the Roomba 800 series up for the challenge?
Next, as iRobot pivoted away from the stagnant Defense & Security market, its Home Robot segment currently accounts for 90% of all revenue. But much of the burden for its future performance lands squarely on the round shoulders of iRobot's dramatically redesigned Roomba 800 series vacuums, which comprised 36% of total revenue in the third quarter.

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iRobot CEO Colin Angle insisted they expect to see strong sales continue in the fourth quarter both domestically and overseas, as retailers were gearing up to replenish their inventory ahead of the holiday season. iRobot also kicked off an ambitious holiday advertising campaign in Q3 to educate consumers on the Roomba 800 series' unique features, which include a maintenance-free brushless design, a drastically improved battery, and a vacuum that's five times more powerful and removes up to 50% more debris than its predecessors.

Needless to say, if consumers' early enthusiasm for the Roomba 880 has waned, it'll weigh heavily on iRobot's top and bottom lines.

Progress in emerging products
Finally, even if the Roomba continues to outperform, I'll be listening closely for details on iRobot's efforts to diversify. That most notably includes its burgeoning line of telepresence machines, from the Ava 500 enterprise bot to the healthcare-oriented RP-VITA.

Last quarter, iRobot stated it sold eight Ava 500 robots to customers including AT&T, and said additional Ava 500 trials were being conducted with several other companies across multiple industries. iRobot also said that 14 RP-VITA robots were installed in hospitals by its partner, InTouch Health, and noted that there's a large opportunity to expand its reach to hospitals in all 31 states in Mexico.

In addition, when speaking recently about iRobot's significant annual R&D spending, CFO Alison Dean pointed out that the company regularly allocates as much as a quarter of those funds to key advancements like navigation, manipulation, and, more recently, leveraging the cloud. Naturally, I would love to hear more about how iRobot is planning to capitalize on these advancements.

The article 3 Things to Watch When iRobot Corporation Reports Earnings originally appeared on Fool.com.

Steve Symington owns shares of iRobot. The Motley Fool recommends iRobot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.