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Why Is Logitech (LOGI) Down 3.6% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Logitech (LOGI). Shares have lost about 3.6% in that time frame, outperforming the S&P 500.

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

Logitech Reports Healthy Q4 Results

Logitech reported solid fourth-quarter fiscal 2019 results, wherein both the top line and the bottom line surpassed estimates and improved year over year.

Non-GAAP earnings came in at 38 cents per share, surpassing the Zacks Consensus Estimate of 30 cents. The bottom line also improved from the year-ago quarter figure of 32 cents.

Net sales of $624.3 million beat the consensus estimate of $619 million and rose 5% year over year. Revenues were up 9% in constant currency. Revenue growth stemmed from consistent strength in Gaming, Video Collaboration, and Creativity & Productivity businesses.

Segmental Details

Logitech’s Gaming segment jumped 9% year over year to $137.6 million. Meanwhile, Video Collaboration grew 27% to $69.4 million.

Mobile Speakers business showed significant improvement after a disappointing fiscal third quarter, and surged 62% to $22.7 million. Audio & Wearables segment also witnessed 18% year-over-year growth.

However, Smart Home segment put up a disappointing show. Sales in this segment plunged 28% to $11.5 million.

Logitech’s Creativity and Productivity business comprises four sub-business lines — Keyboards and Combos, Pointing Devices, PC Webcams, and Tablet and Other Accessories. Apart from Pointing Devices, which grew 1% year over year, each of the other lines registered decline. Keyboards & Combos fell 3%, PC Webcams dived 4%, and Tablet & Other Accessories plunged 14%.

Notably, the Other segment, whose products the company is currently in the process of transitioning out of, registered a whopping 377% surge in the reported quarter.

Margins & Operating Metrics

Non-GAAP gross profit rose 3.9% year over year to $237.2 million. Non-GAAP gross margin increased 160 basis points (bps) to 38%,

Non-GAAP operating expenses jumped 7.8% to $173.1 million.

Non-GAAP operating income climbed 16.3% to $64.1 million. Operating margin of 10.3% expanded 100 bps from the year-ago quarter.

Liquidity

As of Mar 31, 2019, Logitech’s cash and cash equivalents were $604.5 million compared with $584.5 million in the previous quarter.

Additionally, the company generated operating cash flow of $31.7 million in the fiscal fourth quarter compared with $176.2 million in the prior quarter.

Full-Year Highlights

For  full-year  fiscal  2019, Logitech recorded the sixth consecutive year of growth. Revenues of $2.8 billion grew 9% year over year. The top-line growth was 10% in constant currency year over year. Notably, the rise came within the company’s guided range.

Non-GAAP operating income grew 23% to $352 million. Non-GAAP earnings jumped 26% to $2.01 compared with $1.60 a year ago.

Guidance

Logitech provided view for fiscal 2020. The company expects the non-GAAP operating income to be $375-$385 million.

Revenue growth is anticipated within mid-high single digits in constant currency.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

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 an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Logitech has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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