Foolish Forecast: iRobot's Still Dancing

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Robot maker iRobot (Nasdaq: IRBT) had a busy 2007. It did the meet-and-greet rounds with everyone from shock-gun maker TASER (Nasdaq: TASR) to fighter-jet builder Lockheed Martin, and its robotic Small Unmanned Ground Vehicle -- jointly developed with Boeing (NYSE: BA) and SAIC (NYSE: SAI) -- was in demand.

I've said it before, and I'll say it again. You've come a long way from vacuum cleaning, baby.

What analysts say:

• Buy, sell, or waffle? Seven analysts follow iRobot. Four rate it a buy, and three give it a hold.
• Revenue. On average, they're looking for 59% quarterly sales growth to $97.2 million.
• Earnings. They think the company earned $0.42 per share in the fourth quarter.

What management says:
iRobot scooped the analysts on this story last month, when it preannounced its likely numbers for your prescient pleasure. According to management, it will confirm on Tuesday that Q4 brought in about $99 million in sales and $0.80 per share in profits.

So either the analysts aren't reading the company's press releases (unlikely, since Wall Street usually cribs its earnings estimates from management guidance verbatim), or the numbers stated in the previous section are non-GAAP (Latin for "we're not counting the income tax valuation reversal").

What management does:
However analysts count the numbers, Tuesday's news should do wonders for iRobot's margin trends. Well, at least for the net margin. CEO Colin Angle warned us in January that we'll see "lower-than-expected gross margin," and that litigation costs from iRobot's recent tussle with Robotic FX will hurt the operating margin further.

Margins	7/06	9/06	12/06	3/07	6/07	9/07
Gross	35.6%	36.3%	36.9%	36.1%	35.6%	32.7%
Operating	1.7%	1.4%	0.0%	(1.3%)	(2.7%)	(8.0%)
Net	3.0%	3.1%	1.9%	0.5%	(1.0%)	(6.4%)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Over at Motley Fool Rule Breakers, our analysts are looking past the tax arcana affecting Tuesday's news. Instead, they're focusing on the fact that iRobot will report higher sales than Wall Street expected, citing "brisk" Roomba sales at Best Buy (NYSE: BBY) in support of this view.

Just making lemonade out of small, bumpy yellow fruit, you say? Perhaps. But there's a method to our growth-investing team's optimism, in my view. (And I can't say this enough -- remember that my view is biased in favor of iRobot, because I am a shareholder.) You see, the more iRobot sells, the greater its economies of scale. In economic theory, at least, that should yield rising gross margins for iRobot over time. In addition to the obvious benefits of higher sales simply generating more profits, the sales should also become more profitable.

Hope springs eternal.

Catch up on all the latest iRobot news with:

• iRobot Thanks the Tax Man
• IRBT SUGV -- ASAP!
• iRobot Vaporizes a Rival
• iRobot Battles Back