Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What's happening: iRobot Corporation (IRBT +0.00%) shares dropped more than 10% early Thursday after the robot maker announced mixed fourth quarter 2014 results and light 2015 guidance.
Quarterly revenue climbed 20.7% year over year to $159.3 million, which translated to net income per share that nearly tripled, to $0.31. Both figures were within iRobot's guidance range -- though revenue was on the lower end while net income was at the top. Analysts, on average, were looking for higher sales of $164 million to result in lower earnings of $0.30 per share.
Why it's happening: "All three of our businesses met our expectations and made significant progress against their strategic plans," said iRobot CEO Colin Angle, "setting us up well for 2015."
For 2015, iRobot expects revenue of $625 million to $635 million, earnings per share between $1.25 and $1.45, and adjusted EBITDA of $79.8 million. However, Wall Street was modeling 2015 sales and earnings of $643.1 million and $1.44 per share, respectively. Angle explained that while Home Robot revenue -- which comprises 90% of iRobot's total -- should continue to see strong domestic growth in the mid-teens, international growth will be held back by "macros and currency devaluations." He also elaborated during the subsequent conference call that iRobot isn't directly affected by currencies because it sells its products to distributors in dollars. But during prolonged periods of devaluation as currently seen in Europe and Japan, resulting pricing pressures negatively affect distributors' ability to invest in marketing.
Meanwhile, iRobot's Defense & Security segment is expected to return to growth in 2015 for the first time since 2011, but will still remain a small part of the overall business for now. iRobot is also aiming to improve the scalability of its Remote Presence business while maintaining revenue over 2014 at roughly $3 million -- two-thirds of which should come from its RP-VITA healthcare bot, while the remaining third will come from its AVA 500 enterprise platform.
iRobot's guidance shortfall relative to analysts' expectations wasn't that significant, but it's unsurprising that the market is bidding down shares today. In the end, long-term investors should be encouraged that iRobot's growth story continues to progress at the company's own pace.
