Things haven't been looking good for Logitech (NASDAQ:LOGI) lately. After previously posting four-in-a-row earnings beats, the Swiss computer peripherals producer first merely met the consensus number in fiscal Q4 2007 (suffering an 8% haircut in consequence), followed by an honest-to-goodness earnings miss last quarter. Can it get back on track when it reports its fiscal Q2 2008 numbers tomorrow afternoon?

What analysts say:

  • Buy, sell, or waffle? Twenty analysts now follow Logitech, up one from last quarter. Fully 15 of them rate it a buy, four more say hold, and there's just one seller.
  • Revenues. On average, analysts expect to see 11% sales growth to $555.6 million.
  • Earnings. Profits are predicted to increase by a penny to $0.27 per share.

What management says:
Doggone webcams! For the second time in a row, Logitech saw the little electronic picture-takers dominate its earnings story in fiscal Q1 2008. Whether or not Microsoft (NASDAQ:MSFT) was to blame for the lost market share, one thing's for sure: Declining webcam sales helped push total sales growth in Europe into negative territory, even as Logitech posted double-digit sales gains in the Western Hemisphere and Asia.

Logitech says, however, that its webcam sales are already bucking up in the Americas; next stop, Europe. If all goes as planned, the company still expects to grow both sales and operating profit at about 15% this year, with gross margins close to 34%.

What management does:
Now the bad news: If all goes as planned, that would make for a decline in gross margins, which Logitech has kept north of 34% on a rolling basis for the last two quarters. This could similarly depress operating margins, which, while still higher than those posted by rivals such as Sony (NYSE:SNE), Nam Tai (NYSE:NTE), Philips (NYSE:PHG), or Plantronics (NYSE:PLT), do appear to be slipping.

Margins

3/06

6/06

9/06

12/06

3/07

6/07

Gross

32.0%

31.7%

32.5%

33.7%

34.3%

34.9%

Operating

11.1%

10.6%

10.9%

11.5%

11.2%

11.0%

Net

10.1%

10.2%

10.4%

11.1%

11.1%

10.7%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Turning to Logitech's balance sheet, though, I don't see any serious threat to Logitech's future margins. The company's billing situation is good -- accounts receivable have been, on average, just 6% higher over the last six months than they were in the year-ago period. Meanwhile, inventories were up just slightly higher. Compared to sales growth that, webcams notwithstanding, rose approximately 10% year over year, I continue to see Logitech running a tight ship, cash flow management-wise.

While I wouldn't necessarily buy the shares at today's prices (22 times trailing free cash flow and 25 times trailing earnings seems a bit much to pay for a firm that only expects to grow profits at a 15% clip), neither do I see Logitech going down in flames.

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Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.