Logitech's Q4 Earnings Surpass Estimates - Analyst Blog

Logitech International SA LOGI reported fiscal fourth-quarter 2014 earnings of 14 cents per share versus the Zacks Consensus Estimate of a loss of 1 cent. Further, quarterly earnings were also up compared with 1 cent a share in the prior-year quarter.

For full-year 2014, non-GAAP earnings came in at 76 cents a share, up from $0.31 a year ago, reflecting a 145% increase.

The year-over-year increase in earnings was due to solid performance in its growth categories, namely, tablet accessories, PC gaming and wireless speakers. Moreover, Logitech experienced growth in tablet accessories across all its operating regions.

Revenues

Net sales in the fourth quarter were up 3.4% year over year to $485 million, compared with $469 million in fourth-quarter 2013. Revenues also exceeded the Zacks Consensus Estimate of $463 million by 4.7%. Improved sales performance in the company's growth categories were partially offset by continued weak market conditions, especially in Europe and a decline in the global PC market.

Sales by Channel

The company's retail sales increased 3.0% year over year to $420 million. Sales in the OEM division increased 8.2%, while sales in the Video conferencing division increased 4.1%.

Retail Category Sales by Product Division

PC gaming posted a robust 86.0% increase, while Tablet & Other Accessories posted a 26.2% decline. The other categories within the broader retail category posted an overall decline of 5.3% year over year.

Margins

Gross margin for the quarter declined to 34.2% compared with 34.8% in the fourth quarter of 2013. Operating income for the reported quarter was $23.0 million, compared with an operating loss of $34 million in the fourth quarter of the previous year. Operating expenses were down by almost 12.3% year over year to $143 million due to cost savings attributable to restructuring charges.

Balance Sheet and Cash Flow

As of Dec 31, 2013, cash and cash equivalents were $469.4 million, up 40.6% from the year-ago level.

Net cash provided by operating activities was $93.9 million at the end of the quarter versus $12.8 million in the prior-year period.

Outlook

Driven by the strong performance of the company in the fourth quarter, Logitech has provided its outlook for fiscal 2014. The company expects sales at $2.16 billion and non-GAAP operating income of $145 million.

Looking Ahead

Logitech is doing well in the tablet and gaming accessories market, along with its portfolio of wireless speakers. The company reported earnings improvement, as expected, as it is reaping benefits from its restructuring and turnaround plans.

Going forward, the company intends to focus on its core product line by divesting its non-strategic assets. However, the competitive markets and the consistently slumping desktop PC business are likely to be a headwind for the company.

Currently Logitech has a Zacks Rank #3 (Hold). Some better-ranked stocks in the computer peripheral market are Hewlett Packard HPQ, Ebix Inc. EBIX and iGATE Corporation IGTE. All three carry a Zacks Rank #2 (Buy).