Logitech's Updated Research Report - Analyst Blog

On May 16, 2014, we issued an updated research report on Logitech International SA LOGI. The company reported strong fourth-quarter fiscal 2014 results with year-over-year growth in both earnings and revenues. The company is doing well in the gaming accessories market along with its portfolio of wearable and wireless speakers.

Logitech delivered a positive surprise of 1100.0% in the last quarter. Further, it has delivered positive earnings surprises in each of the last four quarters, with an average beat of 396.7%.

The earnings were driven by the success of the company's ongoing three-year turnaround plan that was designed to reduce costs while driving up profits and margins significantly. Per the plan, Logitech has been working on its core business structure including its designing, manufacturing and distribution system to improve its operational efficiency significantly. Going forward, the company intends to streamline its business by divesting its non-strategic assets.

The company is also focusing on developing product designs to gain a competitive edge and hiring experts to achieve this end.

Further, the company's strong cash and balance sheet position will allow it to pursue strategic mergers and acquisition to expand its business further. Apart from this, the company is taking initiatives like share repurchases and dividend payment in its concerted efforts to increase the returns to its investors.

Driven by the strong performance of the company in the fourth quarter, Logitech has provided its outlook for fiscal 2015. The company expects sales at $2.16 billion and non-GAAP operating income of $145 million.

However, the competitive markets and the consistent slump in the desktop PC business are likely to be headwinds for the company.  The company is working to capitalize on its expertise in designing keyboards that is likely to benefit its tablet accessories and PC gaming business and will help improve the market prospects.

Logitech currently carries a Zacks Rank #1 (Strong Buy).

Key Picks from the Sector

Other stocks that are worth considering in this sector include LG Display Co., Ltd. LPL, Planar Systems Inc. PLNR and Synaptics Inc. SYNA, all three of which carry a Zacks Rank #2 (Buy).

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