One company that vividly illustrates the trade war between the U.S. and China is iRobot (IRBT 3.12%). After the stock reached an all-time high in August, bears mauled it in October when the company said it would take a $5 million hit to the bottom line, the result of 10% tariffs on its robotic vacuums. Then the stock soared early this year when iRobot delivered better-than-expected results and said it would engage a contract manufacturer outside China to provide longer-term production stability.

It's time for an update, as iRobot is scheduled to release the financial results of its first quarter after the market closes on Tuesday, April 23. Let's recap the company's fourth-quarter results and review recent trade war developments to see if that provides insight into what investors can expect when iRobot reports earnings.

A father and young daughter sit looking at a notebook computer as a robotic vacuum cleans in the foreground.

Image source: iRobot.

Unexpectedly strong results

Investors weren't expecting much when iRobot reported its fourth quarter. The company had decided not to pass along the cost of the tariffs to retailers during the busy holiday shopping season. That turned out to be a boon, helping the company deliver record results. iRobot generated revenue of $385 million, up 18% year over year.

Profits were also strong, with operating income of $30 million up 29% from the prior-year quarter, resulting in adjusted earnings per share of $0.84, up 56% year over year.

The trade war

While the ongoing trade war between the U.S. and China has yet to be resolved, there has been good news. After a number of high-level meetings in Washington, D.C., and Beijing, President Donald Trump said the countries are nearing a trade deal, though negotiators are still hammering out the details. 

Even more importantly for iRobot, additional 25% tariffs that were originally scheduled to take effect on Jan. 1 have been delayed several times, as officials are making progress toward an eventual deal.

In addition, the company is taking steps to mitigate the potential damage from a protracted and costly trade war. On the conference call to discuss last quarter's results, iRobot CEO Colin Angle said the company "engaged a contract manufacturer outside of China for partial production beginning in 2019," and that the company was undertaking a "supply chain and manufacturing diversification initiative," with plans to start production outside China between 2019 and 2020.

What the quarter might hold

iRobot isn't in the habit of providing quarterly guidance, preferring instead to look at the year as a whole. Given the uncertainty the trade war has surrounded the company with, its full-year forecast for 2019 was surprisingly robust. The company is guiding for revenue in a range of $1.28 billion to $1.31 billion, which would represent year-over-year growth between 17% and 20%. iRobot is also anticipating operating income of between $108 million and $118 million, and earnings per share in a range of $3.00 to $3.25.

We can look to Wall Street's best guess for what to expect for the quarter, though we don't want to get lulled into its short-term thinking. Analysts' consensus estimates are calling for revenue of $251.4 million, an increase of about 16% year over year, and earnings per share of $0.59, a decline of 17%.

The first quarter is historically slower for iRobot after the holiday rush, so investors shouldn't expect the blockbuster results the company pulled off in the fourth quarter. That said, iRobot is taking all the right steps to maintain its leadership in household robotics, and that's what should matter to investors in the long run.