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Logitech (LOGI) Q4 Earnings Top, FY18 Sales Touch Record High


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Logitech International SA LOGI maintained its impressive streak of earnings beats for the 10th consecutive quarter. On an adjusted basis, the company's fourth-quarter fiscal 2018 earnings came in at 32 cents per share, surpassing the Zacks Consensus Estimate of 26 cents. Earnings also marked improvement of 2 cents from the year-ago quarter's figure of 30 cents.

Inside the Headlines

Net sales for the quarter rose 16% year over year to $592.4 million, comfortably beating the Zacks Consensus Estimate of $564 million. Revenue growth stemmed from solid performance in Logitech's Video Collaboration, Gaming businesses, and Tablet & Accessories, partially offset by a lackluster Mobile Speakers business. Moreover, the company's ASTRO acquisition continues to be conducive to its overall performance.

Creativity and Productivity business comprises four sub-business lines - Keyboards and Combos, Pointing Devices, PC Webcams, and Tablet and Other Accessories. All of these registered remarkable year-over-year improvement, which, we believe, is mainly due to a stabilizing PC market.

Gaming surged 77% year over year to $127 million, supported by strong momentum across its latest products. Meanwhile, Video Collaboration grew 41% to $55 million. In addition, smart home category witnessed marginal sales growth of 2% to $16 million.

However, the Music business, which comprises Mobile Speakers units and Audio-PC & Wearables, put up a disappointing show. Audio PC & Wearables sales declined 8% to $55 million, while Mobile Speaker segment sales plunged 65% to $14 million.

Non-GAAP operating margin contracted 60 basis points year over year to 9.3%, while non-GAAP operating income climbed 9.2% year over year to $55.1 million.

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

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

Fiscal 2018 Result Highlights

The company will like to remember fiscal 2018 for at least one reason that is attaining the highest ever sales mark. Logitech's fiscal 2018 revenues jumped 16% year over year to a record high of $2.57 billion, and surpassed the Zacks Consensus Estimate of $2.54 billion. Revenue growth also came ahead of management's earlier expectations of 12-14%. The company's non-GAAP earnings per share increased 13.5% year over year to $1.60 and handily beat the Zacks Consensus Estimate of $1.53.

Liquidity

As on Mar 31, 2018, Logitech's cash and cash equivalents were $641.9 million compared with $564.9 million as of Dec 31, 2017. Additionally, the company generated operating cash flow of $90.2 million for the fourth quarter, and $$346.3 million during the full fiscal.

Guidance

Logitech reaffirmed its guidance for fiscal-year 2019. It still expects non-GAAP operating income of $310-$320 million. Further, the company anticipates fiscal 2019 sales to be up in the high-single-digit range, on constant currency basis.

Bottom Line

Logitech remains optimistic that steady traction of its product lines, as well as upbeat industry trends, will continue to fuel growth. We believe the bullish momentum in Gaming and Video Collaboration businesses, along with the thriving cloud-based video conferencing services, will continue to be catalysts for the company's growth. In addition, the Astro buyout is expected to enable the company to leverage the console gaming market and help accelerate its long-term growth.

Furthermore, it seems that the PC market is moving toward stabilization after several years of decline, which is likely to benefit the company as it might bolster the sales of its most profit-maximizing products like desktops and diverse porting tools.

In addition to the above, the company is coming up with innovative products to cope with the rising trend of smaller and mobile computing devices with touch interfaces which have been rapidly changing the market, and usage models for PC peripherals and webcams.

Nonetheless, escalating R&D expenses, as well as economic challenges in Russia and Europe might dampen its earnings, and remain concerns for the company. Also, strong competition in the sector is another major headwind.

Currently, Logitech has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are CoStar Group, Inc. CSGP , Dell Technologies Inc. DVMT and Science Applications International Corporation SAIC , all sporting a Zacks Rank of 1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Long-term expected earnings growth rates for CoStar Group, Dell Technologies and Science Applications International are 16.8%, 9.1% and 5%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: CSGP , SAIC , DVMT , LOGI



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