Logitech Earnings: Strong Margin Recovery Lifts Shares

No-moat Logitech LOGN reported strong results in its fiscal second quarter, beating the FactSet consensus on revenue and operating income. Fiscal 2024 guidance was lifted meaningfully on non-GAAP operating income. Consequently, the shares were up around 11% intraday. We are currently updating our model for the latest developments but do not anticipate a material change to our $55 (CHF 50) fair value estimate. At current levels, the shares look overvalued.

The company raised fiscal 2024 guidance. Revenue is now expected to be $4.0 billion-$4.15 billion (12%-9% decline) compared with $3.8 billion-$4.0 billion previously (16%-12% decline). On our numbers, sales in keyboards and combos and pointing devices have been better than expected year to date.

Non-GAAP operating income guidance was boosted 22% at the midpoint and is now expected to be $525 million-$575 million compared with $400 million-$500 million previously. Second-quarter margins were better than consensus and our expectations as tight cost discipline is clearly paying off.

Performance was particularly strong in Europe, where constant currency sales only declined 2% compared with a decline of 9% for the group. Margins were abnormally strong, as Logitech benefited from some one-offs in the quarter. Regardless, the company asserted some of the cost reduction in materials is structural, which supports our expected recovery in margins over the medium term.