What happened
Shares of computer peripherals powerhouse Logitech (LOGI +3.39%) soared 12.9% through 11:20 a.m. ET after reporting an unexpectedly decent earnings beat last night.
Analysts had forecast both Logitech's sales and its earnings would decline steeply in its fiscal 2024 first quarter -- and they were right. However, the declines weren't quite as sharp as feared. Instead of earning $0.46 per share (pro forma) on sales of $919.7 million, Logitech earned $0.65 per share on sales of $974.5 million.
NASDAQ: LOGI
Key Data Points
So what
That's the good news. The bad news is that things still looked pretty bad. Sales tumbled 16% year over year for the quarter, and operating profits plunged twice as fast -- down 32%. And while Logitech's non-GAAP, pro forma profits were the aforementioned $0.65, a decline of only 12% year over year, its actual GAAP numbers were much worse: Just $0.39 per share. That's down 36% year over year.
Now what
Still, the news wasn't all bad. Logitech did beat expectations, despite interim CEO Guy Gecht calling the PCs market "still challenging." Logitech also reported positive cash from operations -- nearly $240 million -- and positive free cash flow (FCF) of $223.6 million, versus burning through more than $55 million in cash in last year's fiscal Q1.
And things are looking up for Logitech. Seeing the less-bad-than-expected numbers from Q1, management proceeded to moderate its H1 forecast to a sales decline of just 14% to 19% -- roughly in line with Q1's decline -- and predicted full-year sales will decline only 12% to 16%.
Mind you, we're still talking about declines here, not growth. And management is still giving its earnings forecasts in the form of non-GAAP numbers, which I wouldn't rely on too heavily. Still, the company has now produced four straight quarters of positive free cash flow, totaling $720 million, and valuing the company at a modest 16x FCF.
With a modest dividend yield of close to 2%, and long-term earnings growth forecasts of nearly 12%, Logitech stock is looking close to fairly priced today -- maybe a bit expensive if today's run-up in price holds, but not unreasonably so.
