Logitech International S.A. (LOGI Quick QuoteLOGI - Free Report) reported better-than-expected results in the third quarter of fiscal 2024. The computer peripheral and software maker’s fiscal third-quarter non-GAAP earnings of $1.53 per share beat the Zacks Consensus Estimate of 41 cents per share and registered a year-over-year increase of 34%.

The company revealed that its third-quarter profits mainly benefited from lower product and logistics costs. However, lower revenues partially offset the positive impacts of the aforementioned factors.

Logitech’s fiscal third-quarter revenues of $1.26 billion marked a year-over-year decline of 1% on a reported basis and 3% on a constant-currency basis. However, the top line outpaced the consensus mark of $1.23 billion.

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 Keyboards & Combos and Pointing Devices.

Revenues from Keyboards & Combos improved 4% year over year to $229 million, while Pointing Devices revenues increased 4% year over year to $206 million. According to our model estimates, Keyboards & Combos sales were likely to decline 3% to $213.4 million, while revenues from Pointing Devices were expected to increase 3.8% to $206.6 million.

Tablet Accessories’ sales fell 1% to $64 million. Sales from Webcams were down 9% to $86 million, while Gaming sales declined 1% to $409 million. Our estimates for Logitech’s Tablet Accessories, Webcams and Gaming third-quarter revenues were pegged at $70.3 million, $94.6 million and $356.6 million, respectively.

Revenues from Video Collaboration also declined 2% to $170 million. Our estimates for the Video Collaboration segment were pegged at $171.2 million.

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 11% year over year to $46.6 million in the third quarter, the Other segment’s sales plunged 16% year over year to $49 million. Our estimates for the Headsets and Other segments were pegged at $46.6 million and $36.7 million, respectively.

Margins & Operating Metrics

The non-GAAP gross profit improved to $531.4 million from $481.8 million in the year-ago quarter. The non-GAAP gross margin expanded 440 basis points from the prior-year quarter to 42.3%. The year-over-year increase was driven by lower product and logistics costs and reduced promotional activities, partially offset by an unfavorable product mix.

Non-GAAP operating expenses increased 1.8% to $283 million. As a percentage of revenues, non-GAAP operating expenses rose 60 bps to 22.5%.

The non-GAAP operating income soared 21.6% to $248.2 million from $204.2 million reported in the year-ago quarter. The operating margin improved to 19.8% from 16.1% in the year-ago quarter. The increase in the operating margin mainly reflects improved gross margins, partially offset by higher operating expenses as a percentage of sales.

Liquidity and Shareholder Return

As of Dec 31, 2023, LOGI’s cash and cash equivalents were $1.41 billion, up from $1.16 billion recorded in the previous quarter. Additionally, the company generated $443 million in cash from operational activities in the third quarter and $906 million in the first nine months of fiscal 2024.

In the third quarter, the company repurchased shares worth $187.8 million but did not pay out dividends. In the first nine months of fiscal 2024, it bought back shares worth $376.8 million and paid $182.3 million in dividends.

Fiscal 2024 Guidance Update

Buoyed by the stronger-than-expected third-quarter performance, Logitech raised its forecast for revenues and non-GAAP operating income. The company now expects fiscal 2024 sales in the band of $4.2-$4.25 billion, indicating a decline of 6-7%. Earlier, it had anticipated revenues to decline 9-12% to the $4-$4.15 billion band.

Non-GAAP operating income is anticipated in the range of $610-$660 million, suggesting a 2-11% fall year over year. The company previously forecasted that non-GAAP operating income would decline 2-11% to the $525-$575 million range.

Zacks Rank & Other Stocks to Consider

Currently, Logitech sports a Zacks Rank #1 (Strong Buy). Shares of LOGI have soared 65.7% over the past year.

Some other top-ranked stocks from the broader technology sector are Zoom Video Communications Inc. (ZM Quick QuoteZM - Free Report) , Amazon.com (AMZN Quick QuoteAMZN - Free Report) and NVIDIA Corporation (NVDA Quick QuoteNVDA - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Zoom’s fiscal 2024 earnings has been revised upward by 18 cents to $4.94 per share in the past 60 days, suggesting year-over-year growth of 13%. The long-term estimated earnings growth rate for the stock stands at 33.5%. Shares of ZM have risen 0.2% over the past year.

The Zacks Consensus Estimate for Amazon’s 2023 earnings has been revised upward by 2 cents to $2.69 per share in the past 60 days, which calls for an increase of 278.9% on a year-over-year basis. The long-term expected earnings growth rate for the stock is pegged at 28.5%. AMZN stock has returned 60.6% over the past year.

The consensus mark for NVIDIA’s fiscal 2024 earnings has been revised upward by 2 cents to $12.31 per share over the past 30 days, indicating a whopping 269% increase from fiscal 2023. It has a long-term earnings growth expectation of 13.5%. In the trailing 12 months, NVDA stock has surged 209.9%.