Logitech tumbles as Red Sea crisis shrouds Q3 earnings, guidance boost

Logitech (NASDAQ:LOGI) skidded 10% on Tuesday as worries over the Red Sea crisis overshadowed fiscal 2024 third-quarter earnings results that bested expectations.

"As it relates to the Red Sea, it adds about four weeks of lead time," said Logitech Chief Financial Officer Chuck Boynton on the earnings call. "So it's not that material. There will be an impact to air, as I mentioned earlier, and a little higher cost. So I would expect a little bit of inventory increase, maybe we can keep it flat, but I would expect a little bit of an inventory increase as we get into Q4."

Logitech (LOGI), which makes electronic accessories such as speakers, webcams and keyboards, warned its profit margins may take a hit in the short-term due to the rising Red Sea crisis. Due to attacks in the Red Sea by militants in Yemen, trade ships are avoiding the area, increasing shipping times between Europe and Asia.

The company reiterated there is no change to its long-term gross margin forecast between 39% and 44%, however.

For the period ending December 31, Logitech's (LOGI) third-quarter adjusted earnings rose 34% year-over-year to $1.53 per share. This beat the consensus by $0.36.

Quarterly revenue came in at $1.26B, beating the consensus by $10M. Cash flow from operations was $443 million, up 58% compared to the prior year.

During the period, pointing devices, keyboards, and combos outperformed gaming, while gaming outperformed webcams and headsets, Logitech said.

Strong outlook

Despite the trade disruptions in the Middle East, Logitech (LOGI) raised its sales outlook for fiscal year 2024. It now sees total sales between $4.2B and $4.25B, up from a prior outlook from $4-$4.15B.

It also boosted its forecast for adjusted operating income to be between $610M and $660M, up from a prior range of $525 to $575M. This was an increase of 4% over consensus estimates.

Analyst Erik Woodring at Morgan Stanley found the quarterly results positive.

"The non-GAAP gross margin at 42.% was particularly impressive this quarter, and marked the strongest quarterly gross margin in 10 quarters," Woodring wrote.