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Logitech (LOGI) Up 11.3% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Logitech International S.A. (LOGI - Free Report) . Shares have added about 11.3% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is LOGI 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 drivers.

Logitech Q4 Earnings Top, FY18 Sales Touch Record High

Logitech maintained its impressive streak of earnings beats for the 15th consecutive quarter. On an adjusted basis, the company’s fourth-quarter fiscal 2018 earnings came in at 32 cents per share, surpassing the Zacks Consensus Estimate of 26 cents. Earnings also marked improvement of 2 cents from the year-ago quarter’s figure of 30 cents.

Inside the Headlines

Net sales for the quarter rose 16% year over year to $592.4 million, comfortably beating the Zacks Consensus Estimate of $564 million. Revenue growth stemmed from solid performance in Logitech’s Video Collaboration, Gaming businesses, and Tablet & Accessories, partially offset by a lackluster Mobile Speakers business. Moreover, the company’s ASTRO acquisition continues to be conducive to its overall performance.

Creativity and Productivity business comprises four sub-business lines — Keyboards and Combos, Pointing Devices, PC Webcams, and Tablet and Other Accessories. All of these registered remarkable year-over-year improvement, which, we believe, is mainly due to a stabilizing PC market.

Gaming surged 77% year over year to $127 million, supported by strong momentum across its latest products. Meanwhile, Video Collaboration grew 41% to $55 million. In addition, smart home category witnessed marginal sales growth of 2% to $16 million.

However, the Music business, which comprises Mobile Speakers units and Audio-PC & Wearables, put up a disappointing show. Audio PC & Wearables sales declined 8% to $55 million, while Mobile Speaker segment sales plunged 65% to $14 million.

Non-GAAP operating margin contracted 60 basis points year over year to 9.3%, while non-GAAP operating income climbed 9.2% year over year to $55.1 million.

Fiscal 2018 Result Highlights

The company will like to remember fiscal 2018 for at least one reason that is attaining the highest ever sales mark. Logitech’s fiscal 2018 revenues jumped 16% year over year to a record high of $2.57 billion, and surpassed the Zacks Consensus Estimate of $2.54 billion. Revenue growth also came ahead of management’s earlier expectations of 12-14%. The company’s non-GAAP earnings per share increased 13.5% year over year to $1.60 and handily beat the Zacks Consensus Estimate of $1.53.

Liquidity

As on Mar 31, 2018, Logitech’s cash and cash equivalents were $641.9 million compared with $564.9 million as of Dec 31, 2017. Additionally, the company generated operating cash flow of $90.2 million for the fourth quarter, and $346.3 million during the full fiscal.

Guidance

Logitech reaffirmed its guidance for fiscal-year 2019. It still expects non-GAAP operating income of $310-$320 million. Further, the company anticipates fiscal 2019 sales to be up in the high-single-digit range, on constant currency basis.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. Last month, the consensus estimate has shifted downward by 22.2% due to these changes.

Logitech International S.A. Price and Consensus

 

VGM Scores

At this time, LOGI has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. Following the exact same course, the stock was also allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for growth based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision looks promising. Notably, LOGI has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.




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