Tariff woes could hurt iRobot Q3 earnings

iRobot (NASDAQ: IRBT) is scheduled to report third-quarter 2019 earnings results after the closing bell on Tuesday, October 22. The maker of robotic home appliances is expected to report lower earnings and revenues during the quarter, hurt by headwinds related to the US-China trade tariffs.

When the company last reported results in July, it saw weakness in top-line growth despite beating bottom-line estimates. This forced iRobot to cut full year revenue target to a range of $1.20-1.25 billion, from the previous range of $1.28-1.31 billion. EPS outlook was also slashed to $2.40-3.15, versus the prior outlook of $3.15-3.40.

iRobot’s primary market is North America but most of its manufacturing happens in China, thus placing it in a tough spot. The company had last quarter stated that it sees the recently implemented 25% tariffs to constrain its US market segment growth in the second half of the year.

Of course, iRobot is in the process of shifting production from China to Malaysia to offset some of the tariff headwinds, but any material impact from these activities will take at least another two quarters to shape up.

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The company already holds an enviable share of around 60% in the robot vacuum market. But price hikes driven by tariffs as well as competition from new entrants will become a major spoilsport. While Terra-branded lawn movers are on the way, it should be noted that the market for robotic movers are not as large as that of robotic vacuums.

For the third quarter, analysts expect earnings of $0.52 per share, compared to $1.12 per share. Revenues are projected to slip 2% to $259.38 million.

IRBT stock has tumbled 28% since the beginning of this year. It has a Moderate Buy rating in the market.

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