Logitech (LOGI) Tops Q3 Earnings Estimates, Raises Sales View

Logitech LOGI on Monday reported better-than-expected third-quarter fiscal 2022 results. The company’s third-quarter non-GAAP earnings of $1.55 per share surpassed the Zacks Consensus Estimate of $1.31. However, the bottom line registered a year-over-year decline of 37%.

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The dismal bottom line reflects the company’s planned increased promotional spending, higher investment in retail point of sale marketing and industry-wide elevated component costs.

Its third-quarter revenues of $1.63 billion beat the consensus mark of $1.51 billion. However, the top line declined 2% from the year-ago quarter (2% on constant currency) due to a strong year-over-year comparison, where sales increased 85% (80% on constant currency) in the third quarter of fiscal 2021.

Logitech has been benefiting from elevated demand for its video collaboration, keyboards & combos and pointing devices tools, mainly driven by heightening work-from-home and learn-from-home trends. Additionally, demand for gaming products shot up on the growing popularity of online video games and eSports amid the stay-at-home scenario. Also, the PC peripheral market is witnessing strong traction, which is aiding the top line.

Segment Details

Logitech’s Gaming segment’s sales climbed 8% year over year to $469 million. Revenues from Pointing Devices increased 8% year over year to $231 million. Keyboards & Combos’ sales grew 29% to $282 million.

Video Collaboration’s sales declined 2% year over year to $287 million, mainly due to a comparison to the year-ago quarter, where the segment registered more than 200% growth in revenues. Sales from PC Webcams were down 13% to $115 million, while the Tablet and Other Accessories’ sales dipped 40% to $83 million.

The Audio & Wearables segment’s sales declined 32% year over year to $104 million. Mobile Speakers’ sales decreased 22% to $57 million. The Smart Home segment’s sales plunged 57% year over year to $5 million.

Margins & Operating Metrics

Non-GAAP gross profit decreased 12% to $663 million from the year-ago quarter’s $574 million. Non-GAAP gross margin contracted 460 basis points from the prior-year quarter to 40.6%. The year-over-year decline was mainly due to the year-ago quarter’s elevated levels and was in line with management’s anticipation.

Non-GAAP operating expenses flared up 30% to $361 million. As a percentage of revenues, non-GAAP operating expenses shot up to 22.1% from the year-earlier quarter’s figure of 16.7%.

Non-GAAP operating income plummeted 37% to $302 million from $476 million reported in the year-ago quarter. Operating margin declined 10.1% to 18.5% from the year-ago quarter’s 28.6%. The decline in profits mainly reflects Logitech’s planned increased investment in marketing and innovations to support its long-term growth.

Liquidity and Shareholder Return

As of Dec 31, 2021, LOGI’s cash and cash equivalents were $1.36 billion compared with $1.14 billion recorded in the previous quarter. Additionally, the company generated operating cash flow of $377 million during the third quarter and $199 million in the first three quarters of fiscal 2022.

During the third quarter of fiscal 2022, the company repurchased shares worth $116 million. In the first three quarters of fiscal 2022, it bought back shares worth $291 million and paid $159 million in dividend.

Raised Fiscal 2022 Outlook

Buoyed by better-than-expected third-quarter performance, Logitech raised its fiscal 2022 outlook. The company now expects full-fiscal sales to grow between 2% and 5% compared with its earlier projection of flat (+/- 5%) sales. Management also raised the non-GAAP operating income guidance range to $850-$900 million from the $800-$850 million range projected previously.

Zacks Rank & Stocks to Consider

Currently, Logitech carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the broader technology sector include Broadcom AVGO, Advanced Micro Devices AMD and Jabil JBL. While Broadcom sports a Zacks Rank #1 (Strong Buy), Advanced Micro Devices and Jabil each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Broadcom’s first-quarter fiscal 2022 earnings has been revised upward by 8.1% to $8.15 per share over the past 60 days. For fiscal 2022, earnings estimates have moved upward by 6.5% to $33.03 per share over the past 60 days.

Broadcom’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 1.4%. Shares of AVGO have rallied 16.8% in the trailing 12 months.

The Zacks Consensus Estimate for Advanced Micro Devices’ first-quarter 2022 earnings has been revised upward by a penny to 68 cents per share over the past 30 days. For 2022, earnings estimates have moved upward by a penny to $3.32 per share in the past seven days.

Advanced Micro Devices’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 14%. AMD stock has rallied 23% over the past year.

The Zacks Consensus Estimate for Jabil’s second-quarter fiscal 2022 earnings has been revised upward to $1.47 per share from $1.41 60 days ago. For fiscal 2022, earnings estimates have been revised upward by 25 cents to $6.58 per share in the past 60 days.

Jabil’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 18.1%. Shares of JBL have rallied 44.5% over the past year.

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