iRobot Violates the First Law

Shareholders in robot maker iRobot (Nasdaq: IRBT  ) felt the cold metal slap of reduced guidance today, as company executives issued numbers well below expectations. Full-year 2012 guidance of $465 million to $485 million in revenue clocks in a notch higher than 2011's $465.5 million, but EPS estimates of 85 cents per share are well below both the current year's $1.44 per share and 2012 estimates of $1.45. The company even expects to post a loss in the upcoming quarter, something that hasn't happened in several years.

Cue the short-circuiting comments. (Danger, Will Robinson!) While today's drop might look like a good opportunity to buy in, iRobot might not be much of a growth engine in 2012.

Domo arigato
Both quarterly and full-year results trounced their sequential predecessors, and most (but not all) other numbers showed positive increases:

Metric

Current Period

Year-Ago Period

Annual Revenue $465.5 million $401.0 million
Q4 Revenue $130.8 million $114.0 million
Annual Net Income $40.2 million $25.5 million
Q4 Net Income $10.6 million $7.0 million
Annual R&D Spending $36.5 million $24.8 million
Home Robots Shipped 207,000 189,000
Gov / Industrial Robots Shipped 773 871

Source: iRobot press release.

The drop in big-ticket government and industrial sales is a major worry. Not only did fewer robots clank into action on the battlefield this year, but the backlog for those 'bots dropped precipitously. iRobot rumbled into 2011 with $23.9 million in the backlog, but 2012 begins with less than a third of that figure. Stronger demand for home-based 'bots offset that last year, but the company doesn't seem confident that the Roomba can carry it to new heights in the coming months.

Changing gears?
Although iRobot did beat estimates this quarter, it's a growth stock only so long as it keeps, well, growing. Losing out on lucrative military contracts hurts, but it might be the kick in the pants the company needs to more aggressively grow its consumer-focused business. Given the reduced guidance, I'm not so sure today's big drop represents a buying opportunity -- but a company this innovative could surprise everyone with new technology. It's certainly worth keeping your eye on.

Add iRobot to your Watchlist now to get all the most important news delivered daily. Looking for other companies that have a more secure future in store? Take a look at the Fool's free report, "The Next Trillion Dollar Revolution." Perhaps the technology of the future can be found in an entirely different industry -- download this free report to find out.

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Read/Post Comments (2) | Recommend This Article (4)

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  • Report this Comment On February 09, 2012, at 5:42 PM, valuegeek wrote:

    Yes, the guidance was disappointing, but I'd rather management be over-cautious than promise too much. The nature of military procurement is that it tends to be lumpy.

    The PackBots and SUGVs are a major force multiplier and are likely to play an increasing role in squad-level tactics. I assume they'll need to be incorporated in training going forward, ensuring demand even after withdrawal from Afghanistan (budgets permitting). However, we're not just talking about the U.S. military--the armed forces of friendly nations will be purchasing Packbots as well. I think military adoption of the tech is still at an early stage, and iRbt is well positioned to compete for contracts--hopefully we see more of those sales making it to the bottom line.

    I'm actually more worried about consumer robots: I'm just not sure how many more Americans will want a Roomba underfoot, or be able to justify the purchase of a gutter-cleaning robot to their spouse. With sales of consumer robots in the Far East--the Urheimat of advanced robotics--increasing 50% year-over-year, it looks like the consumer division is going to carry the company for now. Long-term, I think the success of the consumer division will depend on innovative and really useful products---when I see a lawnmower-bot I can run from my iPad, or that will chase the deer out of the garden, I'll be sold.

    I'm a cheapskate by inclination, and I've never paid 25x earnings for anything, but sometimes it's tempting.

  • Report this Comment On February 10, 2012, at 9:01 AM, purdys wrote:

    IRobot reported that they took 10m$ in the fouth quarter that was not due until the 1st quarter... Hence record earnings 2011 and a lot less the 1st quarter 2012 .  

    An add of 17,000 home robots a year will not drive the numbers in the near future.  But a hit of 30+% is not enough to get the P/E corrected??

    They had no 4th quarter income other than the pre payment from this one.

    Shame on all of us analysts and IRobot management as this should have been realized in the last quarter guidance.  

    Wow the whole year wiped out!  +++

    This should not happen to any stock!!!

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