Logitech stock sinks on supply chain woes despite Q2 beat

Logitech International SA (NASDAQ:LOGI) reported better-than-expected second-quarter earnings, but its stock plummeted over 12% in early trading on Wednesday as the company warned of substantial supply chain disruptions potentially impacting third-quarter sales. The computer peripherals manufacturer reported adjusted earnings per share of $1.51, surpassing analyst estimates by $0.21.

Revenue for the quarter reached $1.22 billion, a 3% year-over-year increase, slightly above the $1.21 billion estimated by analysts. This marked Logitech's eleventh consecutive quarter of growth, driven by strength in the Americas, Video Collaboration, and Gaming segments.

However, investors' attention quickly shifted to the company's third-quarter outlook, which is being affected by significant issues stemming from a semiconductor supplier incident. Logitech now anticipates third-quarter revenue between $1.36 billion and $1.43 billion, with the midpoint of $1.395 billion exceeding the analyst consensus of $1.3 billion.

The company has estimated a negative impact of $70 million to $80 million due to the supply chain disruption. One of Logitech's semiconductor suppliers experienced a severe incident at its manufacturing facility at the end of June, leading to a closure that was only recently reopened in September. Despite returning to production, the facility's current output remains below the necessary levels, with full production expected to resume by the end of the year.

CEO Hanneke Faber stated that the company delivered its eleventh consecutive quarter of growth and launched 19 new products for the holiday quarter. For the second quarter, adjusted gross margin expanded by 140 basis points to 45.2%, and adjusted operating income rose by 0.4% to $231 million. During the quarter, Logitech returned $406 million to shareholders via its annual dividend and share repurchases.

The company now projects third-quarter adjusted operating income to be between $220 million and $255 million.