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Logitech (LOGI) Down 4% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Logitech (LOGI - Free Report) . Shares have lost about 4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Logitech due for a breakout? 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 drivers.

Logitech Reports Healthy Q1 Results

Logitech reported solid first-quarter fiscal 2020 results, wherein both the top line and the bottom line surpassed estimates and improved year over year.

Non-GAAP earnings came in at 39 cents per share, surpassing the Zacks Consensus Estimate of 35 cents. The bottom line also improved from the year-ago quarter figure of 34 cents.

Net sales of $644 million beat the consensus estimate of $638 million, and rose 6% year over year in dollars and 9% in constant currency. Revenue growth stemmed from consistent strength in Video Collaboration and Mobile Speakers, and a solid product portfolio.

Segmental Details

Logitech’s Gaming segment’s sales slipped 1% year over year to $134.5 million. Video Collaboration jumped 25% to $73.4 million.

Mobile Speakers business’ sales surged 47% to $50.4 million and Audio & Wearables segment witnessed 12% year-over-year growth.

Moreover, Smart Home segment witnessed growth after putting up a disappointing show in the previous quarter. Sales grew 9% to $9.9 million.

Logitech’s Creativity and Productivity business comprises four sub-business lines — Keyboards and Combos, Pointing Devices, PC Webcams, and Tablet and Other Accessories. Keyboards & Combos revenues increased slightly (0.4%) year over year, and Tablet & Other Accessories jumped 18%. However, Pointing Devices and PC Webcams dived 5% each.

Notably, the Other segment, products of which the company is currently in the process of transitioning out of, registered a whopping 427% surge in the reported quarter.

Margins & Operating Metrics

Non-GAAP gross profit rose 7% year over year to $243.4 million. Non-GAAP gross margin increased 40 basis points (bps) to 37.8%.

Non-GAAP operating expenses jumped 5.7% to $176.4 million.

Non-GAAP operating income climbed 10.7% to $67 million. Operating margin of 10.4% expanded 50 bps from the year-ago quarter.

Liquidity

As of Jun 30, 2019, Logitech’s cash and cash equivalents were $597 million compared with $604.5 million in the previous quarter.

Additionally, the company generated operating cash flow of $36.5 million in the fiscal first quarter compared with $31.7 million in the prior quarter.

Guidance

Logitech reaffirmed view for fiscal 2020. The company expects the non-GAAP operating income to be $375-$385 million.

Revenue growth is anticipated within mid-high single digits in constant currency.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

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

Logitech has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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