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Why Is Logitech (LOGI) Up 12.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Logitech (LOGI - Free Report) . Shares have added about 12.8% 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.

Recent Earnings

Logitech reported impressive first-quarter fiscal 2019 results, wherein both the top line and the bottom line beat the Zacks Consensus Estimate.

The company maintained its impressive streak of earnings beat for the 11th consecutive quarter. Non-GAAP earnings came in at 34 cents per share, surpassing the Zacks Consensus Estimate of 27 cents. Earnings also marked an improvement from the year-ago quarter’s figure of 24 cents.

Net sales for the quarter rose 15% year over year to $608 million, comfortably beating the Zacks Consensus Estimate of $584.4 million. Revenue growth stemmed from solid performance in Logitech’s Video Collaboration, Gaming businesses and Tablet & Accessories, partially offset by a lackluster Mobile Speakers and Smart Home businesses.

Segmental Details

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

Gaming surged 75% year over year to $136 million, supported by strong momentum across its latest products. Meanwhile, Video Collaboration grew 65% to $58.8 million.

However, the Mobile Speakers business and Smart Home segment put up a disappointing show. Mobile Speaker sales plunged 45% to $34 million, while the smart home category witnessed sales decline of 45% to $9 million.

Margins & Operating Metrics

Non-GAAP gross margin increased 40 basis points (bps) year over year to 37.4%.

Non-GAAP operating income climbed 40.8% to $60.52 million driven by a $10 million restructuring credit related to the realignment of resources for growth. Operating margin of 9.9% expanded 180 bps from the year-ago quarter.

Liquidity

As of Jun 30, 2018, Logitech’s cash and cash equivalents were $604.1 million compared with $641.9 million as of Mar 31, 2018. Additionally, the company generated operating cash flow of $12.3 million for the fiscal first quarter.

Guidance

The bullish momentum in Gaming and Video Collaboration businesses, along with the thriving cloud-based video conferencing services boosted the company’s confidence in their growth prospects. Coupled with the upcoming acquisition of the microphone company, Blue Microphones, which is expected to close in the current quarter, Logitech raised guidance for fiscal 2019.

Sales growth is now projected to be 9-11% in constant currency compared with its earlier guidance of high single-digit sales.

Non-GAAP operating income is expected to be in the range of $325 million to $335 million, up from $310-$320 million projected earlier.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 5.41% due to these changes.

VGM Scores

At this time, Logitech has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% 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 momentum based on our style scores.

Outlook

Logitech 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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