It has been about a month since the last earnings report for Logitech (LOGI). Shares have added about 2.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Logitech due for a pullback? 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 catalysts.
Logitech's Q4 Earnings and Revenues Beat Estimates
Logitech reported stronger-than-expected fourth-quarter fiscal 2023 results. The computer peripheral and software maker’s fiscal fourth-quarter non-GAAP earnings of 50 cents per share surpassed the Zacks Consensus Estimate of 42 cents per share. However, the bottom line plunged 38.3% from the year-ago quarter’s earnings of 81 cents.
The decline in the bottom line reflects lower revenues. However, reduced operating expenses partially offset the negative impacts of the aforementioned factors.
Logitech’s fiscal fourth-quarter revenues plunged 21.9% year over year to $960.1 million while beating the consensus mark for the same. The decline can be attributed to a challenging macroeconomic environment, which led Enterprise customers to reduce their IT budgets and delay project investments.
In the past year, Logitech benefited from the elevated demand for its video collaboration, keyboards & combos and pointing device tools, mainly driven by the heightening of work-from-home and learn-from-home trends. Additionally, the demand for gaming products shot up because of the growing popularity of online video games and eSports amid the stay-at-home scenario.
However, the demand softened due to the reopening of economic and business activities later on. Moreover, enterprises are postponing their large and expensive IT investment plans amid growing recessionary concerns.
Logitech registered a sales decline across the majority of key product categories year over year.
Revenues from Pointing Devices dropped 10% year over year to $160.8 million, while Gaming revenues plunged 24% year over year to $239 million. Keyboards & Combos’ sales declined 19% to $187.8 million. Sales from PC Webcams were down 41% to $49.7 million, while Tablet and Other Accessories sales increased 2% to $68.4 million.
Revenues from Video Collaboration also decreased 27% to $178.7 million. The Audio & Wearables segment’s sales declined 24% year over year to $62.4 million. Mobile Speakers’ sales fell 53% to $11.8 million. The Other segment’s sales plunged 31% year over year to $1.4 million.
Margins & Operating Metrics
The non-GAAP gross profit decreased 30% to $348.8 million from the year-ago quarter’s $498.3 million. The non-GAAP gross margin contracted 420 basis points from the prior-year quarter to 36.3%.
Non-GAAP operating expenses declined 22.1% to $266.5 million. As a percentage of revenues, non-GAAP operating expenses remained flat at 27.8%.
The non-GAAP operating income plummeted 47.3% to $82.3 million from the $156.1 million reported in the year-ago quarter. The operating margin declined to 8.6% from 12.7% in the year-ago quarter. The decline in profits mainly reflects reduced revenues and gross margins.
Liquidity and Shareholder Return
As of Mar 31, 2023, LOGI’s cash and cash equivalents were $1.15 billion, up from the $1.04 billion recorded in the previous quarter. Additionally, the company generated $216.8 million in cash from operational activities in the fourth quarter. In the full-fiscal 2023, Logitech generated operating cash flow of $534 million.
In the fourth quarter, the company repurchased shares worth $90.6 million but didn’t pay any dividends. In fiscal 2023, it bought back shares worth $418.3 million and paid out $158.7 million in dividends.
Fiscal 2024 Guidance
For fiscal 2024, Logitech expects sales to decline between 18% and 22% to the $1.8-$1.9 billion band. The non-GAAP operating income is anticipated in the range of $160-$190 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
The consensus estimate has shifted -10.13% due to these changes.
At this time, Logitech has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Logitech has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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