On Apr 12, Zacks Investment Research upgraded iRobot Corporation IRBT to a Zacks Rank #3 (Hold) from a Zacks Rank #4 (Sell). Going by the Zacks model, companies with a Zacks Rank #3 are likely to perform in line with the broader market, over the next few quarters.

Why You Should Not Lose Hope on the Stock

Over the last three months, iRobot’s shares yielded a return of 13.6%, outperforming 8.3% growth recorded by the Zacks categorized Industrial Automation/Robotics industry.

iRobot anticipates to accrue revenues within the range of $770–$785 million in 2017, estimating a 14–15% year-over-year increment, excluding the impact of acquisition. The upside is likely to be stemmed by sturdy sales of home robotics products such as Roomba and Braava robots.

Moreover, the company recently (Apr 11, 2017) completed the acquisition of Sales On Demand Corporation’s (SODC) distribution business in Japan. iRobot believes that the buyout would  fortify its foothold in Japan, the company’s biggest home robotics market outside North America.

In addition, iRobot’s new capital allocation program is expected to boost profitability in the near term. The plan targets to make a number of strategic investments in order to bolster revenues in 2017 and beyond. Reinforcing the company’s competency in the field of robotic vacuum cleaning market, tapping the growing demand of the robotic floor care market in China, scaling up existing business infrastructure, innovating non-floor care home robotic products and lowering operational costs are the major agendas addressed by the company under this program.

However, the profit making prospects of this Zacks Rank #3 stock, post the spin-off of  its Defense & Security business (Apr 2016), still remain ambiguous to the market.

Furthermore, iRobot conducts its business in a highly dynamic and competitive technology market. Prominent product or process innovation of any major industry rival might adversely affect iRobot’s market share, moving ahead. Additionally, the company relies on single source contract manufacturers. If these dealers suddenly terminate their contract with the company or fail to offer good quality products, then iRobot would fail to deliver innovative home robotics products in the market on time.

Stocks to Consider

Some better-ranked stocks within the industry are listed below:

Brady Corporation BRC has a positive average earnings surprise of 20.84% for the trailing four quarters and boasts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ACCO Brands Corporation ACCO has a positive average earnings surprise of 24.74% for the last four quarters and currently carries a Zacks Rank #2 (Buy).

Avery Dennison Corporation AVY also holds a Zacks Rank #2 and generated an average earnings surprise of 6.17% in the past quarters.

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iRobot Corporation (IRBT): Free Stock Analysis Report
 
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