A month has gone by since the last earnings report for Logitech (LOGI Quick QuoteLOGI - Free Report) . Shares have added about 11.2% 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's Q2 Earnings and Revenues Surpass Estimates

Logitech reported better-than-expected results in the second quarter of fiscal 2024. The computer peripheral and software maker’s fiscal second-quarter non-GAAP earnings of $1.09 per share beat the Zacks Consensus Estimate of 66 cents per share and registered a year-over-year increase of 30%.

The company revealed that its second-quarter profits exceeded the pre-pandemic level, mainly driven by improved component costs and reduced operating expenses. However, lower revenues partially offset the positive impacts of the aforementioned factors.

Logitech’s fiscal second-quarter revenues of $1.06 billion marked a year-over-year decline of 8% on a reported basis and 9% on a constant-currency basis. However, the top line outpaced the consensus mark of $978.4 million.

In 2020 and 2021, LOGI benefited from the elevated demand for its video collaboration, keyboards & combos and pointing device tools, mainly driven by the heightening of work-from-home and learn-from-home trends. Additionally, the demand for gaming products shot up due to the growing popularity of online video games and eSports amid the stay-at-home scenario. However, the demand softened due to the reopening of economic and business activities later on.

Segment Details

Logitech registered a sales decline across the majority of key product categories year over year except for Pointing Devices and Tablet Accessories.

Revenues from Pointing Devices improved 3% year over year to $192 million, while Tablet Accessories revenues increased 17% year over year to $64 million. According to our model estimates, Pointing Devices sales were likely to decline 11.1% to $164.6 million, while revenues from Tablet Accessories were expected to increase 13.8% to $61.7 million.

Keyboards & Combos’ sales fell 3% to $195 million. Sales from Webcams were down 14% to $88 million, while Gaming sales plunged 12% to $282 million. Our estimates for Logitech’s Keyboards & Combos, Webcams and Gaming second-quarter revenues were pegged at $173.7 million, $76.4 million and $259 million, respectively. These estimates depicted a year-over-year decline of 13.5%, 25.1% and 19.6%, respectively.

Revenues from Video Collaboration also plunged 15% to $152 million. Our estimates for the segment were pegged at $141 million, suggesting a 21.2% decline.

In the first quarter of fiscal 2024, Logitech reclassified its product segments by removing the Audio & Wearable and Mobile Speakers categories and adding Headsets and Other categories. While the Headsets segment’s sales declined 1% year over year to $44 million in the second quarter, the Other segment’s sales plunged 35% year over year to $40 million.

Margins & Operating Metrics

The non-GAAP gross profit improved to $444 million from $443 million in the year-ago quarter. The non-GAAP gross margin expanded 340 basis points from the prior-year quarter to 42%. The year-over-year increase was driven by cost improvement, lower promotions and less reliance on expedited shipping, partially offset by an unfavorable product mix.

Non-GAAP operating expenses declined 9% to $261 million, mainly due to a 14% reduction in sales and marketing expenses. As a percentage of revenues, non-GAAP operating expenses contracted 30 bps to 24.7%.

The non-GAAP operating income soared 17% to $183 million from $156 million reported in the year-ago quarter. The operating margin improved to 17.3% from 13.6% in the year-ago quarter. The increase in the operating margin mainly reflects improved gross margins and lower operating expenses as a percentage of sales.

Liquidity and Shareholder Return

As of Sep 30, 2023, LOGI’s cash and cash equivalents were $1.16 billion, down from $1.25 billion recorded in the previous quarter. Additionally, the company generated $223 million in cash from operational activities in the second quarter and $463.1 million in the first half of fiscal 2024.

In the second quarter, the company repurchased shares worth $94 million and paid out $182.3 in dividends. In the first half of fiscal 2024, it bought back shares worth $188.9 million.

Fiscal 2024 Guidance Update

Buoyed by the stronger-than-expected second-quarter performance, Logitech raised its forecast for revenues and non-GAAP operating income. The company now expects fiscal 2024 sales in the band of $4.0-$4.15 billion, indicating a decline of 9-12%. Earlier, it had anticipated revenues to decline 12-16% to the $3.8-$4 billion band.

Non-GAAP operating income is anticipated in the range of $525-$575 million, suggesting a 2-11% fall year over year. The company previously forecasted non-GAAP operating income to decline 15-32% to the $400-$500 million range.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 11.78% due to these changes.

VGM Scores

At this time, Logitech has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Logitech has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.