iRobot Sweeps the Street

Considering the magnitude of iRobot's (Nasdaq: IRBT  ) earnings beat Wednesday, you might have expected management to boast. Instead, this longtime Motley Fool Rule Breakers recommendation played it cool.

Reporting after markets closed, iRobot announced that it grew revenue 12% in fiscal Q4 2011, and increased profits at a 30% clip. The quarter wound up a simply monster year, in which iRobot's cumulative revenues leapt 34% and profits exploded upward by 638%. When all was said and done, iRobot earned $0.96 per share.

Once again, iRobot owed the bulk of its success to two factors:

  • International sales of the Roomba (and corollary "home robots" designs). Sales here rose 70% over 2009 levels
  • Warbots. So-called "government & industrial" sales climbed 29%, and recent bullish pronouncements from the Pentagon suggest that we could see further sales of the SUGV robot that iRobot is building for SAIC (NYSE: SAI  ) and Boeing (NYSE: BA  ) .

But even in the lagging U.S. home robot market, iRobot reversed last year's decline, eking out a small sales gain in the final months of the year. Looking forward, management predicts a somewhat less hit-it-outta-the-park performance in 2011 -- but still a good year overall. Sales are projected to climb 12% or more, while profits (lacking last year's tax boost) should at least hold steady in the mid-$0.90s.

What's under the hood?
As you may recall, three months ago I worried that Roomba inventories had once again begun to outrun sales growth. That was bad news the last time we saw it happen, so last month, I urged you to keep close lookout in case the issue reemerged in February.

To the contrary, iRobot consigned this worry to the dustbin of history. Year-end inventories now show a 16% Roomba reduction from year-ago levels -- quite a feat, considering the strong 34% growth in sales . Accounts receivable, too, are down roughly 3.5% from a year ago. With its cash management now once more beyond reproach, iRobot easily achieved my projection for free cash flow, generating $36.6 million in 2010.

Here's hoping for more of the same as the New Year trundles along.

Fool contributor Rich Smith owns shares of iRobot, a Motley Fool Rule Breakers recommendation. SAIC is a Motley Fool Inside Value selection and a Motley Fool holding. 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.


Read/Post Comments (3) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 12, 2011, at 3:14 PM, jimmy4040 wrote:

    I love Rule Breakers, but if you've held the stock for as long as it's been a recommendation, you've made no money at all.

    I actually had a Roomba a few years ago. It worked about once a week for 18 months, not exactly heavy usage, and required extensive cleaning each time it was used.

    Then one day it stopped. I called up the company and got told "too bad, it''s out of warranty" (paraphrasing)

    So of course I told them too bad, I'll never buy another one.

    They should focus exclusively on the military market. They're not a successful consumer-oreinted company.

  • Report this Comment On February 12, 2011, at 11:58 PM, akarren wrote:

    That is not true, they grew by 70% internationally in the consumer-oriented market.

    Don't forget we just went through the "Great Recession".

  • Report this Comment On February 13, 2011, at 1:07 AM, TMFDitty wrote:

    @jimmy4040: I love my Roombas ... but I'm right there with you on the brushes-cleaning. It's probably the single complaint I hear most often about the Roomba, and in real need of a redesign.

    TMFDitty

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