Logitech (LOGI) Down 3.3% Since Earnings Report: Can It Rebound?

About a month has gone by since the last earnings report for Logitech International S.A. (NASDAQ:LOGI) . Shares have lost about 3.3% in that time frame.

Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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 catalysts.

Logitech Tops Q2 Earnings & Sales, Reiterates View

Switzerland-based computer peripherals company, Logitech 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.

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%.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

VGM Scores

At this time, the stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. Following the exact same course, the stock was allocated also a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are looking for a below average return from the stock in the next few months.