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What to Expect When iRobot Reports Earnings Next Week

2018 has been a roller-coaster ride for iRobot (NASDAQ: IRBT) investors. Even though the company reported strong fourth-quarter 2017 results in February, Wall Street was disappointed with its guidance and sent shares plummeting by 34% in the days that followed. After treading water for much of the next three months, iRobot began a remarkable ascent, with its share price doubling between May and August. The biggest contributor to that climb was better-than-expected financial results to close the second quarter. After topping out in August, shares are now down about 25% over fears that sales will suffer due to the ongoing trade dispute and the imposition of tariffs.

Investors will be watching closely when iRobot reports its third-quarter results after the market close on October 23. Let's take a look at how the company performed last quarter and what the future may hold.

The Roomba i7. Image source: iRobot.

Fears put to rest

When iRobot reported its second-quarter results in July, investors cheered. Revenue of $226 million grew 24% year over year, topping analysts' consensus estimates of about $219 million. Net income was also strong at $10.5 million, generating earnings per share of $0.37, up 37% compared to the prior-year quarter and more than double the $0.18 expected by analysts.

Strength was broad-based across all major regions, and unit sales jumped 27% year over year to 953,000. The average selling price (ASP) increased by 3.6% year over year, topping out at $285.

The company has also been taking advantage of the volatility in its stock price to reduce its share count. After iRobot's share price plummeted in February, the company announced a $50 million stock repurchase plan, and that entire amount had been exhausted by last quarter. iRobot bought back a total of about 800,000 shares at an average price of $62.57. With the current share price near $90, it seems like money well spent.

The future is less certain

iRobot doesn't provide quarterly forecasts, preferring instead to focus on the longer term. Due to the strength of its performance through the second quarter, the company raised its guidance for 2018. iRobot forecast full-year revenue of about $1.07 billion and earnings per share of $2.40, both at the midpoint of its guidance, while also putting it right in line with analysts' expectations for the year.

Another wild card for the quarter is Amazon Prime Day. This was the fourth successive year that iRobot's Roomba was a featured product during the e-commerce blowout, and the device sold out with twice the volume as last year's sale in the U.S. market. The Roomba was sold for the first time in the Europe, Middle East, and Africa (EMEA) markets, as well as in Japan, and "the results in those regions were great," the company said.

All eyes will be on the results and the accompanying guidance for signs that the trade dispute and the resulting tariffs might spell trouble moving forward.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and iRobot. The Motley Fool has a disclosure policy.

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