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Why Is Logitech (LOGI) Up 15% Since Last Earnings Report?

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A month has gone by since the last earnings report for Logitech (LOGI). Shares have added about 15% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Logitech due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Logitech Q4 Earnings & Revenues Top Estimates

Logitech reported fourth-quarter fiscal 2020 results, wherein both bottom and top lines surpassed estimates.

Non-GAAP earnings came in at 42 cents per share, surpassing the Zacks Consensus Estimate by 16.7%. The bottom line also improved from the year-ago quarter’s 38 cents.

Net sales of $709 million surpassed the consensus mark of $661 million and rose 14% year over year in dollars and 15% at constant currency.

The year-over-year increase stemmed from strong growth across all business segments. Bracken Darrell, president and CEO, Logitech, noted, "Video conferencing, working remotely, creating and streaming content, and gaming are long-term secular trends driving our business. The pandemic hasn’t changed these trends: it has accelerated them."

Segmental Details

Logitech’s Gaming segment’s sales grew 8% year over year to $148.9 million. Video Collaboration sales witnessed a 60% rally to $110.7 million.

However, Mobile Speakers’ sales fell 7% to $21.2 million.

Audio & Wearables segment sales remained flat year over year at $65 million. Smart Home segment sales fell 28% year over year to $8.3 million.

Logitech’s Creativity and Productivity business comprises four sub-business lines — Keyboards and Combos, Pointing Devices, PC Webcams, and Tablet and Other Accessories. Revenues from Pointing Devices, and Keyboards and Combos grew 3% and 12% year over year, respectively. Moreover, revenues from PC Webcams, and Tablet and Other Accessories surged 32% and 36%, respectively.

The Other segment declined 59% to $94 million in the quarter.

Margins & Operating Metrics

Non-GAAP gross profit rose 19% year over year to $282.5 million. Non-GAAP gross margin expanded 180 basis points (bps) from the year-ago quarter to 39.8%.

Non-GAAP operating expenses grew 17.6% to $203.5 million.

Non-GAAP operating income climbed 23% to $79 million. Operating margin of 11.1% expanded 80 bps.

Liquidity

As of Mar 31, 2020, Logitech’s cash and cash equivalents were $715.6 million compared with $656.05 million in the previous quarter.

Additionally, the company generated operating cash flow of $100.8 million in the fiscal fourth quarter compared with $181.12 million in the prior quarter.

Fiscal 2020 Highlights

Revenues for the year grew 7% in dollars and 9% at constant currency to $2.98 billion. Non-GAAP earnings of $2.15 grew 7% year over year.

Cash flow from operations was $425 million, up from $305 million a year ago.

Guidance

Logitech provided a view for fiscal 2021. The company expects non-GAAP operating income of $380-$400 million.

Revenue growth is anticipated in the mid-single-digit range at constant currency.

How Have Estimates Been Moving Since Then?

Estimates review followed an upward path over the past two months.

VGM Scores

At this time, Logitech has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Logitech has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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