Robot maker, iRobot Corporation (IRBT) reported mixed first-quarter 2014 results, showing year-over-year improvement in revenues but a decline in earnings. The company posted earnings of 18 cents per share, below the year-ago quarter figure of 29 cents but surpassed the Zacks Consensus Estimate of 16 cents.

Revenues: Revenues for the reported quarter improved roughly 7.5% year over year to $114.2 million and were a tad higher than the Zacks Consensus Estimate of $113.0 million. The increase in revenues resulted from improved demand in the Home Robots segment.

Margins/Costs: Gross margin in the reported quarter was 45.3%, up 150 basis points (bps) compared with 43.8% in the year-ago quarter. Operating expenses increased 16.4% year over year in the quarter to $43.7 million. Adjusted earnings before interest, taxes, depreciation and amortization (:EBITDA) were $14.2 million compared with $15.2 million in the year-ago quarter.

Segment Details: The Home Robots segment generated revenues of $108.0 million in the quarter, up 16.5% year over year on the back of healthy performances in domestic as well as overseas markets. The segment’s gross margin improved 220 bps year over year to 50.4%.Units shipped in the quarter increased 10.5% year over year to 465,000.

The Defense & Security segment’s revenues were recorded at $5.6 million compared with $11.1 million in the year-ago quarter. The year-over-year sales drop of 49.5% was in line with the company’s expectations. The segment’s gross margin dropped to 37.2% from 47.5% in the year-ago quarter.

Balance Sheet/Cash Flow: Exiting the first quarter of 2014, iRobot’s cash and cash equivalents were recorded at $154.8 million, compared with $165.4 million in the preceding quarter. iRobot had long-term debt of $4.4 million, down from $4.7 million in the quarter ended Dec 28, 2013.

In the reported quarter, iRobot used cash of $7.8 million for operating activities, against cash generation of $156,000 in the year-ago quarter. Capital expenditure was recorded at $2.2 million against $1.1 million in the quarter ended Mar 2013.

Outlook: Management expects the products launched in and after the reported quarter to gain significant market share in the coming quarters. Home Robots segment is expected to continue generating higher revenues. In second-quarter 2014, revenues are expected in the range of $138.0 to $145.0 million, with earnings per share in the 15 to 25 cents range. Adjusted EBITDA in the quarter is expected in the range of $13.0 to $17.0 million.

iRobot has reiterated its expectations for 2014 where revenues are expected within $560.0 to $570.0 million. Adjusted EBITDA is estimated in the range of $74.0 to $78.0 million, with earnings per share in the range of $1.00 to $1.15.

Other Stocks to Consider

iRobot currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Kadant Inc. (KAI), The Middleby Corporation (MIDD) and Broadwind Energy, Inc. (BWEN). While Kadant and Middleby sport a Zacks Rank #1 (Strong Buy), Broadwind Energy has a Zacks Rank #2 (Buy).

Read the Full Research Report on KAI
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