A month has gone by since the last earnings report for Logitech (LOGI Quick QuoteLOGI - Free Report) . Shares have added about 3.5% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Logitech's Q3 Earnings and Revenues Surpass Estimates

Logitech 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.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted 14.13% due to these changes.

VGM Scores

At this time, Logitech has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, 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

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