Logitech (LOGI) to Post Q4 Earnings: What's in the Cards?

Logitech International S.A.LOGI is scheduled to report fourth-quarter fiscal 2018 results on May 2, after the market closes . The question lingering in investors' minds is whether or not this computer peripheral maker will be able to post a positive earnings surprise in the quarter. Notably, the company has a mixed earnings surprise history.

The company has witnessed a remarkable streak of beating earnings estimates. In fact, in each of the trailing four quarters, Logitech surpassed the Zacks Consensus Estimate, coming up with an average positive earnings surprise of 13.2%.

Let's see how things are shaping up prior to this announcement.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Logitech is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP , and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

It should be noted that stocks with a Zacks Rank #4 or 5 (Sell rated) are best avoided, especially when the company is seeing negative estimate revisions.

Logitech carries a Zacks Rank of 3 and has an Earnings ESP of 0.00%, which makes surprise prediction difficult. Furthermore, the Zacks Consensus Estimate for fiscal fourth-quarter earnings remained unchanged over the past 30 days.

However, the company is likely to continue reporting top and bottom-line growth on a year-over-year basis. The Zacks Consensus Estimate for the quarter to be reported is pegged at 26 cents, representing year-over-year decline of 23.8%. Additionally, analysts polled by Zacks project revenues of roughly $563.7 billion, up 13.6% from the year-ago quarter.

Logitech International S.A. Price and EPS Surprise

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

Factors to Consider

We believe the company's thriving cloud-based video-conferencing services, strategic product launches and restructuring actions will continue to be growth drivers. Logitech is enjoying an all-pervasive growth of its retail business, which is anticipated to continue, going forward. In order to further boost growth, the company is pursuing innovation and expanding its product lines to tap the high potential market for accessories.

Logitech has been able to leverage its software and go-to-market capabilities in a bid to drive market share gains. The company has manufactured innovative options, such as the fastest performing mouse and keyboard switches, as well as a wireless mouse with the longest battery life. A diverse product roster and excellent demand are expected to have driven the company's overall performance in the fiscal fourth quarter as well.

Furthermore, the company's most significant growth driver - gaming - now constitutes 21% of revenues. In the last three quarters, the segment registered year-over-year growth of more than 30%. Continuous innovations and last year's buyout of high-end headset maker - ASTRO Gaming - has made Logitech the leader in a growing space. We believe the gaming business to have bolstered the company's top-line performance in the fiscal fourth quarter as well.

This apart, the company's successful measures to trim infrastructure spending, which are part of its aim of focused cost control and disciplined spending, are proving conducive to margin expansion. Further, the company has been divesting non-profit assets to reduce costs. Along with this, Logitech expects to focus on making selective investments to ensure disciplined cost management in the coming quarters. All these measures are likely to have supported the company's to-be-reported quarter's margins as well as bottom-line results.

Despite these positives, declining demand in the company's most profit-maximizing products, like desktops and diverse porting tools, remains a likely headwind. Moreover, the company's sales are impacted by end-user consumer demand and consequently, unanticipated shifts in consumer buying patterns can affect the business.

In addition to the above, the market where the company operates is highly competitive and characterized by short product life cycles, constant product introductions, rapidly changing technology, evolving customer demands, along with aggressive promotional and pricing practices. Consequently, the need to roll out advanced products in the market in a bid to survive the competition results in significant surges in R&D expenses, which might dampen the company's profitability.

Stocks With Favorable Combinations

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Seagate Technology PLC STX has an Earnings ESP of +3.43% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Arrow Electronics, Inc. ARW has an Earnings ESP of +0.66% and a Zacks Rank of 2.

FireEye, Inc. FEYE has an Earnings ESP of +6.67% and a Zacks Rank of 3.

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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.

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

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