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Logitech (LOGI) to Post Q2 Earnings: What's in the Offing?

Zacks Equity Research

Logitech International S.A. LOGI is scheduled to report second-quarter fiscal 2020 results on Oct 21.

Notably, the company’s earnings beat estimates in each of the trailing four quarters, the average being 15.93%.

In the last reported quarter, the company’s adjusted earnings of 39 cents per share surpassed the Zacks Consensus Estimate of 35 cents, and also increased from the year-ago figure of 34 cents.

Moreover, net sales of $644 million beat the consensus estimate of $638 million and rose 6%. Revenues were up 9% at constant currency.

For the fiscal second quarter, the Zacks Consensus Estimate for revenues is pegged at $725.7 million, indicating 5% growth from the year-ago reported figure. The consensus estimate for earnings stands at 45 cents, suggesting 7.14% rise.

Let’s see how things are shaping up for the upcoming announcement.

Logitech International S.A. Price and EPS Surprise

Logitech International S.A. Price and EPS Surprise
Logitech International S.A. Price and EPS Surprise

Logitech International S.A. price-eps-surprise | Logitech International S.A. Quote

Key Factors

Logitech’s fiscal second-quarter results are likely to have benefited from growth in its video conferencing business, driven by the rising traction of Logitech Sync video conferencing device management platform.

Moreover, throughout the quarter, the company took steps like product launches and upgrades to boost its Gaming segment, which is likely to have augmented the segment’s revenues.

Furthermore, demand for its gaming products, attributable to the growing popularity of eSports, is likely to have been a tailwind.

Also, the worldwide PC market maintained its bullish run in the September quarter, courtesy of the companies transitioning to Microsoft’s MSFT latest Windows 10 software. This bodes well for Logitech, as its PC peripheral equipment sales are significantly dependent on PC shipments.

Further, explosion of content creators is raising demand for applications in Logitech’s Creativity & Productivity segment.

However, adverse currency volatility might have been an overhang on the company’s gross margins.

The quarter-under-review witnessed increased tariffs midway, which are expected to have weighed on margins.

Moreover, Logitech acquired game streaming software provider Streamlabs for $89 million in cash during the quarter. This is likely to have dented cash reserves in the fiscal second quarter.

Further, the Mobile Speakers segment, which had witnessed a strong second-quarter fiscal 2018 due to the launches of BOOM and MEGABOOM speakers, is expected to have witnessed a difficult year-over-year comparison in the quarter to be reported.

What Our Model Says

The proven Zacks model does not conclusively predict an earnings beat for Logitech this time around. The combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP increases the odds of an earnings beat. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Logitech currently carries a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks to Consider

Here are some stocks worth considering as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

Arrow Electronics, Inc. ARW has an Earnings ESP of +0.60% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Avnet, Inc. AVT has an Earnings ESP of +3.08% and is Zacks #3 Ranked.

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Logitech International S.A. (LOGI) : Free Stock Analysis Report
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