Shares of computer hardware and software company Logitech International(NASDAQ: LOGI) dropped on Tuesday after the company reported financial results for its fiscal third quarter of 2024. It largely beat analysts' expectations and raised guidance for the year.
However, investors appear concerned with its inventory and logistics. As of 11:30 a.m. ET, Logitech stock was down about 10%.
Why Logitech stock is down
In Q3, Logitech's sales of $1.26 billion and earnings per share of $1.55 both came in ahead of many analysts' expectations. Moreover, various profit metrics showed robust year-over-year growth, even though sales were down 1%. But Logitech stock fell, nevertheless, due to what's happening in the Red Sea.
Geopolitical turmoil in the Red Sea is disrupting shipping for many companies, including Logitech. New CEO Hanneke Faber said in a Reuters interview that it's causing a delay of about a month in getting inventory to Europe. This is increasing its shipping costs.
Faber tried to encourage investors by pointing out that Europe is only about 30% of Logitech's overall business. But still, investors didn't like the possibility of shipping problems eating into the company's profits.
What to expect now
Logitech did raise its full-year fiscal 2024 guidance today. However, even with the raise, the company expects a 6% to 7% year-over-year decline in sales. Adjusted operating income is expected to climb between 4% and 12%. However, adjusted operating income was down 35% year over year in fiscal 2023. So the expected increase this year is only relative to last year's muted results.
To top it all off, Logitech stock was trading at a two-year high before it released Q3 financial results. Therefore, given declining sales and questions regarding profits, it's not surprising to see the stock pull back from its highs.
To retake these highs, Logitech will probably need to post better growth. The stock will likely struggle until that happens.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Logitech International. The Motley Fool has a disclosure policy.
