Logitech International SA (LOGI) beat the Zacks Consensus Estimate for both earnings and revenues in the fiscal first-quarter 2015 results, driven by strong sales in its growth categories. The computer peripherals company reported adjusted earnings of 23 cents per share, substantially surpassing the Zacks Consensus Estimate of 3 cents per share. Further, quarterly earnings were significantly higher compared with 7 cents a share in the prior-year quarter.

The company’s shares rose 14.6% in the trading session following the earnings announcement, indicating that investors were impressed by the company’s performance.

The year-over-year increase in earnings was attributable to robust performance in its growth categories, led by Mobile Speakers and PC Gaming, although somewhat offset by weakness in Tablet & other Accessories category. Further, Logitech achieved a higher operating leverage through its successful cost-streamlining initiatives.

Logitech reported adjusted net income of $38.2 million, versus $10.7 million in the year-ago quarter. The considerable improvement was mainly driven by higher revenues and superior operational execution.

Including non-recurring items, GAAP net income came in at $22.0 million or 13 cents per share, compared with $1.04 million or 1 penny per share in the year-ago quarter.

Revenues

Net sales were up 1.2% year over year to $483.7 million, compared with $477.9 million in prior-year quarter. Revenues also exceeded the Zacks Consensus Estimate of $469 million. Improved sales performance in the company’s growth categories and strength in the PC market were partially offset by softness in iPad shipments.

Sales by Channel

The company’s Retail sales increased 3.0% year over year to $425.4 million. Sales in the OEM division declined 5.8% year over year to $32.5 million, while sales in the Video Conferencing division slipped 14.6% from the prior-year quarter to $ 25.8 million.

Retail Category Sales by Product Division

PC Gaming posted a 16.6% increase over the prior-year quarter, while Tablet & Other Accessories were weak with a 14.9% year-over-year decline. Mobile Speakers demonstrated remarkable growth with a robust 108.7% increase in revenues over the prior-year quarter.

Other categories within the broader retail division posted an overall decline of 1.2% year over year.

Margins

Adjusted gross margin improved to 38.3% compared with 35.9% in the first quarter. Adjusted operating income was $43.9 million, compared with $12.0 million in the prior-year quarter. Operating expenses were down by almost 4.4% year over year to $158.7 million owing to successful cost-reduction strategies.

Balance Sheet and Cash Flow

At quarter-end, cash and cash equivalents were $485 million, up from $166 million at the end of the year-ago quarter.

The company generated cash flow from operations to the tune of $28 million in the quarter.

Outlook

Encouraged by the strong performance of the company, Logitech reiterated its sales outlook of $2.16 billion for fiscal 2015. Additionally, the company raised its guidance for adjusted operating income for fiscal 2015 to $170 million from the previous expectation of $145 million.

Looking Ahead

Logitech is enjoying strong traction in the mobile speakers and PC gaming market, with some extent of resilience being shown even in the slow PC market. Logitech is set to extend its portfolio for the Samsung platform, so as to capitalize on the associated growth opportunities. The company’s successful restructuring strategies and turnaround plans translated into an improved earnings picture.

Going forward, Logitech intends to focus on its core product line by divesting its non-strategic assets. Creating investment capacities to support future growth and accelerating product innovation are likely to be the company’s priorities. However, highly competitive markets and weakness in the iPad business are likely to be headwinds for the company in the coming quarters.

Currently, Logitech has a Zacks Rank #3 (Hold). Some better-ranked stocks in the computer & technology sector scheduled to report earnings soon include CGI Group, Inc. (GIB), MicroStrategy Inc. (MSTR) and Silicon Motion Technology Corp. (SIMO), each sporting a Zacks Rank #1 (Strong Buy).

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