Financial Performance

IRobot Shares Plunge on China Tariff Worries

The robotic vacuum maker does not plan to raise prices to offset the tariffs even as it increases marketing spend for the holidays.
Matthew HellerOctober 24, 2018

Robotic vacuum maker iRobot’s quarterly revenue and earnings easily beat estimates but its shares fell more than 9% in extended trading Tuesday amid concerns over supply chain disruption due to U.S. tariffs on Chinese imports.

In a rollercoaster after-hours session, the stock initially jumped 10.6% to $101.62 o news that iRobot earned $31.9 million, or $1.12 a share, in the third quarter compared with $22.5 million, or 76 cents a share, in the year-ago period. Revenue rose 28.7% to a record $264.5 million.

Analysts had estimated earnings of 48 cents a share on revenue of $245 million.

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But iRobot disclosed later in the day that the China tariffs would hurt margins as it does not plan to raise prices on its Roomba robots even as it increases marketing spend for the holidays. The stock finished the extended session at $82.99, down 9.6%.

Industrial robots were included in the Trump administration’s first list of tariffs published in April covering about $34 billion worth of imports from China.

IRobot operates an R&D center in Guangzhou, China and contracts production work to some original equipment manufacturers in the province.

Piper Jaffray earlier this month lowered its rating on iRobot shares, predicting the tariffs will hurt the company’s business next year. “If iRobot doesn’t pass the increased prices to the consumer, it would end up with lower gross margins,” analyst Troy Jensen wrote in a client note.

The stock plunge overshadowed the third-quarter results, which also featured 45% revenue growth in the U.S., driven by the successful launch of the Roomba i7/i7+ and Roomba e5 products.

“We have delivered very strong results thus far this year. I am very excited about our positioning for the upcoming holiday season and confident in our ability to deliver our increased 2018 financial expectations,” CEO Colin Angle said in a news release.

For the full year, iRobot now expects to earn $2.65 a share on sales of $1.085 billion in 2018, compared to previous guidance of earnings of $2.40 a share on sales of $1.07 billion.