Logitech (LOGI) Maintains Earnings Streak In Q4, View Intact

Logitech International SA (NASDAQ:LOGI) continued its impressive streak of earnings beats for the sixth consecutive quarter, as its fourth-quarter fiscal 2017 adjusted earnings (including stock-based compensation expense adjustments) of 15 cents per share beat the Zacks Consensus Estimate of 12 cents by nearly 25.0%.

Also, on a non-GAAP basis, the company’s earnings per share came in at 21 cents, up 50.0% on a year-over-year basis. The bottom line’s remarkable year-over-year growth was driven by strong top-line growth.

For fiscal 2017, the company reported non-GAAP earnings per share of $1.32, an impressive increase of 35% compared to the year-ago tally.

Inside the Headlines

Net sales for the quarter rose an impressive 15.2%, year over year, to $496.2 million, surpassing the Zacks Consensus Estimate of $478 million. The entire growth was attributable to the company’s Retail segment, which grew a remarkable 15% year over year, in constant currency. This was the highest quarterly growth achieved by Retail in six years. Also, previously completed Jaybird buyout stoked top-line growth significantly.

For fiscal 2017, the company’s sales grew 9.4% to $2,207 million. Growth in Retail was broad-based growth for the fiscal year, driven by double digit sales growth of four product categories—Video Collaboration, Mobile Speakers, Gaming and Home Control.

Creativity and Productivity business comprises four sub-business lines—Keyboards and Combos, Pointing Devices, PC Webcams, and Tablet and Other Accessories. Of these, Keyboards & Combos grew 14% year over year, while Pointing Devices and PC Webcams showed modest growth of 4% and 11%, respectively. However, revenues of Tablet & Other Accessories plunged 43% due to sluggishness in overall tablet markets.

Gaming surged 23% year over year to $69.0 million, driven by strength in PC gaming. Impressive product sales in both the high-end segment (including G900 wireless gaming mouse) and the more casual offerings (including our Logitech G Prodigy family of gaming gear) fuelled revenues. On the other hand, Video Collaboration grew 70% to $37.1 million on the back of double-digit growth from all three regions.

The Music business, which comprises Mobile Speakers units and Audio-PC & Wearables, witnessed impressive growth driven by solid performance of both the sub-businesses. While Mobile Speaker sales grew 61% due to strong sales in the Americas, Audio PC & Wearables category sales rose 27% during the fourth quarter of fiscal 2017, driven by the Jaybird buyout.

In addition, sales under the Home Control category increased 45% to $15.2 million, driven by continued demand for smart home products. Integration of voice assistants (such as Alexa and Google (NASDAQ:GOOGL) Assistant) into Harmony Hub proved conducive to the sales performance of this segment.

During the fourth quarter of fiscal 2017, Logitech generated record non-GAAP gross margin growth, up 430 basis points to 37.4% year over year. Non-GAAP operating margin for the company expanded a remarkable 210 bps, year over year, to 7.3%, as non-GAAP operating income jumped 61.7% year over year to $36.1 million on top-line strength. Growth in operating profits reflects focused cost-control initiatives and disciplined operational spending as well.

Liquidity

As on Mar 31, 2017, Logitech’s cash and cash equivalents were $547.5 million compared with $519.2 million as of Mar 31, 2016.

Guidance Intact

Concurrent with the fourth-quarter fiscal 2017 results, Logitech reiterated its full-year 2018 guidance. The company continues to expect high single-digit growth in constant currency for retail sales for the fiscal year. It forecasted non-GAAP operating income to lie in the range of $250–$260 million. Logitech also announced a new share buyback program worth $250 million, as part of its three-year capital allocation framework.

To Conclude

Logitech started 2017 on an exceptional note with impressive top and bottom-line beats. Exceptional growth in retail sales for the fourth consecutive year and record gross margin growth highlights the company’s underlying strength. Going forward, Logitech remains confident that overall positive industry trends, strategic investments in core business areas and timely product launches will boost its profitability and sales.

As a tech company, Logitech stands out in the crowd for managing to thwart industry headwinds like restrained corporate spending. We believe that the company’s robust business model that focuses on maximizing profit in PC peripherals and expanding into new business categories will continue to drive growth for the rest of the fiscal year.

Other Stocks to Consider

The company currently sports a Zacks Rank #1 (Strong Buy). Other top-ranked stocks in the broader sector include Motorola Solutions, Inc. (NYSE:MSI) , PCTEL, Inc. (NASDAQ:PCTI) and NCR Corporation (NYSE:NCR) . While PC-Tel sports a Zacks Rank #1, Motorola and NCR Corp. hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Motorola has a striking earnings surprise history for the last four quarters, having beaten estimates all through, for an impressive average beat of 16.4%.

PC-Tel generated three massive beats in the trailing four quarters, for an average positive surprise of 125%.

NCR also has an excellent earnings surprise history, with an average beat of 11.0% for the trailing four quarters, beating estimates all through.

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