Logitech (LOGI) Tops Q2 Earnings & Sales, Reiterates View

Switzerland-based computer peripherals company, Logitech International SA LOGI continued its impressive streak of earnings beat for the eighth consecutive quarter.

On an adjusted basis, the company’s second-quarter fiscal 2018 earnings came in at 40 cents per share, surpassing the Zacks Consensus Estimate of 36 cents by 11.1%. The impressive bottom-line performance can be attributed to robust sales growth across Asia-Pacific along with strong momentum in Gaming and Video Collaboration businesses.

The company reported second-quarter fiscal 2018 GAAP earnings of 34 cents per share, which surged 21.4% year over year.

Inside the Headlines

Net sales for the quarter rose 12.4% year over year to $634.2 million, ahead of the Zacks Consensus Estimate of $630.2 million. Revenue growth was attributable to the solid growth recorded in Logitech’s Gaming, Video Collaboration businesses as well as Smart Home business categories. Notably, double-digit rise in sales was partially offset by a product transition in Mobile Speakers, which drove year-over-year top-line growth.

Creativity and Productivity business comprises four sub-business lines — Keyboards and Combos, Pointing Devices, PC Webcams, and Tablet and Other Accessories. Of these, Pointing Devices remained flat. PC Webcams and Tablet and Other Accessories experienced an increase in sale of 13.2% and 49.5%, respectively. PC Webcams sales were driven by consistent growth in sales in the Americas and Asia Pacific, partially offset by decline in sales of EMEA region.

Gaming surged 43.6% year over year to $ 113.7 million, on the back of strong growth in all three markets and launch of fresh products. Meanwhile, Video Collaboration grew 61% to $46.1 million, aided by broad-based growth in all three markets. In addition, the Music business, which comprises Mobile Speakers units and Audio-PC & Wearables, witnessed mixed performance. Audio PC & Wearables sales rose 1.5% to $63.2 million, largely offset by the drab performance of the Mobile Speaker segment, which fell 7% during second-quarter fiscal 2018.

Additionally, sales under the smart home category witnessed growth of 55% to $18.3 million. The impressive performance was led by strong performance from the company’s voice-enabled Harmony Hub products.

Non-GAAP operating margin contracted 10 basis points year over year to 11.4%, while non-GAAP operating income jumped 11.7% year over year to $72.4 million.

Logitech International S.A. Price, Consensus and EPS Surprise

 

Logitech International S.A. Price, Consensus and EPS Surprise | Logitech International S.A. Quote

Liquidity

As on Sep 30, 2017, Logitech’s cash and cash equivalents were $398.8 million compared with $395.2 million as of Sep 30, 2016. However, the net cash provided by operating activities for the company came in at $68.4 million, a decline from the year-ago tally of $74.9 million.

Guidance

Concurrent with second-quarter fiscal 2018 results, Logitech continues to project non-GAAP operating income in the range of $260-$270 million compared. Further, it continues to expect constant currency fiscal 2018 sales in the range of 10-12%.

Our Take

Logitech remains optimistic that the steady traction of its product lines, as well as positive industry trends will continue to fuel growth, going forward. The broad-based growth in its retail business is a major positive and likely to continue, moving ahead. Moreover, the company’s diligent cost-cutting efforts add to its strength.

However, the rising trend of smaller, mobile computing devices with touch interfaces and the declining demand in the company’s most profit-maximizing products like desktops and diverse porting tools can be a headwind in the near term. Moreover, the market where Logitech International operates is highly competitive. Strong competitors and new entrants in the company’s operating markets also remain a concern.

Logitech currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks worth considering in the same space include Applied Materials, Inc. AMAT, A10 Networks, Inc. ATEN and Arrow Electronics, Inc. ARW. While Applied Materials sports a Zacks Rank #1 (Strong Buy), A10 Networks and Arrow Electronics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Materials has an excellent earnings surprise history, surpassing estimates in the trailing four quarters with an average beat of 2.7%.

A10 Networks has an excellent earnings surprise history, exceeding estimates in the trailing four quarters with an average beat of 61.1%.

Arrow Electronics has posted earning beat thrice in the trailing four quarters. It boasts an average beat of 1.2%.

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