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It has been about a month since the last earnings report for Logitech (LOGI). Shares have lost about 4.8% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Logitech Reports Record Sales in Q2, Misses on Earnings
Logitech reported record quarterly sales reaching second-quarter fiscal 2022 revenues at $1.31 billion, up 4% from the year-ago quarter (2% on constant currency). However, the top-line results missed the Zacks Consensus Estimate of $1.33 billion.
Logitech has been benefiting from the elevated demand for its Video Collaboration tools, mainly driven by the heightening work-from-home and learn-from-home trends. Also, the PC peripheral market is witnessing a strong traction, which is aiding top-line growth.
Additionally, the demand for gaming products shot up on the growing popularity of online video games and eSports amid the stay-at-home scenario.
However, the bottom line registered a year-over-year decline as well as missed the consensus mark. The company’s non-GAAP earnings plunged 44% to $1.05 per share and fell short of the Zacks Consensus Estimate of $1.22.
The dismal bottom-line performance reflects the company’s planned increased promotional spending, higher investment in retail point of sale marketing and industry-wide elevated component costs.
Logitech’s Gaming segment sales climbed 9% year over year to $331 million. Revenues from Pointing Devices increased 10% year over year to $189 million. Keyboards & Combos sales grew 15% to $236 million.
Video Collaboration sales declined 4% year on year to $232 million. Revenues from PC Webcams were down 9% to $94 million, while the Tablet and Other Accessories sales dipped 3% to $81 million.
The Audio & Wearables segment sales declined 15% year over year to $98 million. Mobile Speakers’ sales decreased 11% to $39 million. The Smart Home segment sales plunged 35% year over year to $6 million.
Margins & Operating Metrics
Non-GAAP gross profit decreased 4.5% to $548 million from the year-ago quarter’s $574 million. Non-GAAP gross margin contracted 370 basis points (bps) from the prior-year quarter to 42%.
Non-GAAP operating expenses flared up 52.5% to $337 million. As a percentage of revenues, non-GAAP operating expenses shot up to 25.8% from the year-earlier quarter’s figure of 17.6%.
Non-GAAP operating income plummeted 40.4% to $211 million from the $354 million reported in the year-ago quarter. Operating margin declined 11.9% to 16.2% from the year-ago quarter’s 28.1%.
Liquidity and Shareholders’ Return
As of Sep 30, 2021, Logitech’s cash and cash equivalents were $1.14 billion compared with the $1.50 billion recorded in the previous quarter. Additionally, the company used cash flow of $62.9 million during the fiscal second quarter for operational activities and $177.8 million in the first-half of fiscal 2022.
During the second quarter of fiscal 2022, the company paid a dividend of $159.4 million and repurchased shares worth $119.5 million. In the first-half of fiscal 2022, it bought back shares worth $174.4 million and paid $159.4 million in dividend.
Fiscal 2022 Outlook Reiterated
The company reiterated its projections for revenues and operating income. It still estimates sales to remain flat (+/- 5%) year over year in constant currency. Management also kept the non-GAAP operating income guidance range unchanged at $800-$850 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -12.14% due to these changes.
At this time, Logitech has a subpar Growth Score of D, though it is lagging a bit 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Logitech has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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