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Garmin (GRMN) Beats Earnings & Revenue Estimates in Q2
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Garmin Ltd. (GRMN - Free Report) reported better-than-expected results in the second quarter of 2018, with revenues and earnings both surpassing the Zacks Consensus Estimate.
Earnings of 99 cents per share beat the consensus mark by 12 cents. Earnings were up 46% sequentially and 13% year over year.
Management focuses on continued innovation, diversification and market expansion to explore growth opportunities in all its business segments. However, macroeconomic challenges remain part of the operating environment.
We observe that shares of Garmin have gained 24.9% in the past 12 months, outperforming the industry’s 6.8% rally.
Let’s delve deeper into the numbers.
Revenues
Garmin’s second-quarter revenues of $894.5 million beat the Zacks Consensus Estimate of $852.2 million, increasing 25.8% sequentially and 7.6% from the prior-year quarter. The increase was backed by higher demand across fitness, outdoor, marine and aviation segments.
Segmental Revenues
Garmin’s Outdoor, Fitness, Marine, Auto/Mobile and Aviation segments generated 23%, 25%, 15%, 20% and 17% of quarterly revenues, respectively. Seasonality resulted in considerable variations in Garmin’s quarterly revenues.
Outdoor revenues were up 39.8% sequentially and 3.5% year over year. The year-over-year increase was driven mainly by robust demand for wearables.
The Fitness segment increased 35.6% sequentially and 24.3% from the year-ago quarter. The year-over-year increase was driven by strength in advanced wearables and cycling.
The Marine segment increased 18.5% sequentially and 24% year over year. The year-over-year growth was driven by strength in new products. Also, Navionics’ acquisition added to the growth.
The Auto/Mobile segment was up 27.5% sequentially but down 19.3% on a year-over-year basis. The year-over-year decrease was mainly due to shrinking of the personal navigation device (PND) market.
Aviation segment revenues were up 5% sequentially and 23.3% from the prior-year quarter. The increase was mainly driven by new product introductions such as the G5 indicator system, TXi displays and GFCTM 500/600 autopilots.
Revenues by Geography
While America generated 49% (up 26.3% sequentially and 8.9% year over year) of the total revenues, EMEA and APAC contributed 35% (up 25.7% on a sequential basis but down 1.8% on a year-over-year basis) and 16% (up 24.6% sequentially and 28.4% from the year-ago quarter), respectively.
Operating Results
Gross margin was 58.5%, up 30 basis points from the year-ago quarter. Stronger demand across all segments led to gross margin expansion on a year-over-year basis.
Operating expenses of $305.8 million were up 12% from $274.5 million in the year-ago quarter.
GAAP net income was $190.3 million compared with $177 million a year ago.
Balance Sheet
Inventories were down 8.4% sequentially to $501.5 million. Cash and marketable securities were approximately $1.12 billion compared with $1.07 billion in the last reported quarter. The company has no long-term debt.
As the end of the second quarter, the company generated cash flow of $223.9 million from operating activities and free cash flow of $157.1 million.
2018 Guidance
For full-year 2018, management raised its revenues to $3.3 billion from prior expectation of $3.2 billion and pro-forma earnings to $3.30 per share versus earlier projection of $3.05.
The Zacks Consensus Estimate for 2018 revenues and earnings is pegged at $3.25 billion and $3.14 per share, respectively.
Currently, Garmin carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the same industry include Groupon (GRPN - Free Report) , IAC/InterActiveCorp (IAC - Free Report) and Integrated Device Technology, Inc. . While Groupon and IAC/InterActiveCorp sport a Zacks Rank #1 (Strong Buy), Integrated Device Technology holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Groupon, IAC/InterActiveCorp and Integrated Device Technology is currently projected to be 3%, 7.5% and 10.9%, respectively.
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Garmin (GRMN) Beats Earnings & Revenue Estimates in Q2
Garmin Ltd. (GRMN - Free Report) reported better-than-expected results in the second quarter of 2018, with revenues and earnings both surpassing the Zacks Consensus Estimate.
Earnings of 99 cents per share beat the consensus mark by 12 cents. Earnings were up 46% sequentially and 13% year over year.
Management focuses on continued innovation, diversification and market expansion to explore growth opportunities in all its business segments. However, macroeconomic challenges remain part of the operating environment.
We observe that shares of Garmin have gained 24.9% in the past 12 months, outperforming the industry’s 6.8% rally.
Let’s delve deeper into the numbers.
Revenues
Garmin’s second-quarter revenues of $894.5 million beat the Zacks Consensus Estimate of $852.2 million, increasing 25.8% sequentially and 7.6% from the prior-year quarter. The increase was backed by higher demand across fitness, outdoor, marine and aviation segments.
Segmental Revenues
Garmin’s Outdoor, Fitness, Marine, Auto/Mobile and Aviation segments generated 23%, 25%, 15%, 20% and 17% of quarterly revenues, respectively. Seasonality resulted in considerable variations in Garmin’s quarterly revenues.
Outdoor revenues were up 39.8% sequentially and 3.5% year over year. The year-over-year increase was driven mainly by robust demand for wearables.
The Fitness segment increased 35.6% sequentially and 24.3% from the year-ago quarter. The year-over-year increase was driven by strength in advanced wearables and cycling.
The Marine segment increased 18.5% sequentially and 24% year over year. The year-over-year growth was driven by strength in new products. Also, Navionics’ acquisition added to the growth.
The Auto/Mobile segment was up 27.5% sequentially but down 19.3% on a year-over-year basis. The year-over-year decrease was mainly due to shrinking of the personal navigation device (PND) market.
Aviation segment revenues were up 5% sequentially and 23.3% from the prior-year quarter. The increase was mainly driven by new product introductions such as the G5 indicator system, TXi displays and GFCTM 500/600 autopilots.
Revenues by Geography
While America generated 49% (up 26.3% sequentially and 8.9% year over year) of the total revenues, EMEA and APAC contributed 35% (up 25.7% on a sequential basis but down 1.8% on a year-over-year basis) and 16% (up 24.6% sequentially and 28.4% from the year-ago quarter), respectively.
Operating Results
Gross margin was 58.5%, up 30 basis points from the year-ago quarter. Stronger demand across all segments led to gross margin expansion on a year-over-year basis.
Operating expenses of $305.8 million were up 12% from $274.5 million in the year-ago quarter.
GAAP net income was $190.3 million compared with $177 million a year ago.
Balance Sheet
Inventories were down 8.4% sequentially to $501.5 million. Cash and marketable securities were approximately $1.12 billion compared with $1.07 billion in the last reported quarter. The company has no long-term debt.
As the end of the second quarter, the company generated cash flow of $223.9 million from operating activities and free cash flow of $157.1 million.
2018 Guidance
For full-year 2018, management raised its revenues to $3.3 billion from prior expectation of $3.2 billion and pro-forma earnings to $3.30 per share versus earlier projection of $3.05.
The Zacks Consensus Estimate for 2018 revenues and earnings is pegged at $3.25 billion and $3.14 per share, respectively.
Garmin Ltd. Price, Consensus and EPS Surprise
Garmin Ltd. Price, Consensus and EPS Surprise | Garmin Ltd. Quote
Zacks Rank and Other Stocks to Consider
Currently, Garmin carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the same industry include Groupon (GRPN - Free Report) , IAC/InterActiveCorp (IAC - Free Report) and Integrated Device Technology, Inc. . While Groupon and IAC/InterActiveCorp sport a Zacks Rank #1 (Strong Buy), Integrated Device Technology holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Groupon, IAC/InterActiveCorp and Integrated Device Technology is currently projected to be 3%, 7.5% and 10.9%, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>