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Bull of the Day: Garmin Ltd. (GRMN)

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Garmin Ltd. ((GRMN - Free Report) ) soared after the standout GPS maker posted blowout earnings for the second period in a row in early May.

Garmin’s top and bottom-line growth outlook is stellar as it benefits from its expanding reach across wearables, aviation, boating, and beyond.

Garmin stock has outpaced the Zacks Tech sector during the past 20 years, yet it still trades roughly 10% below its 2021 peaks even as many tech names constantly post new highs.

Fitness Wearables to Aircraft Autopilot Systems

Garmin helped kick off the modern consumer-facing GPS movement over 30 years ago. The goal was to integrate GPS technology into navigation devices for multiple markets. GRMN became a household name for many in the mid-2000s as in-car navigation systems took off. Others might think of Garmin as a fitness wearables and smartwatch firm.

Garmin’s fitness wearables and smartwatches have grown in popularity despite challenges from Apple ((AAPL - Free Report) ) and others. GRMN continues to roll out an array of offerings in this hot space that has plenty of runway remaining. Garmin posted 40% revenue growth in its fitness unit last quarter, driven by elevated demand for “advanced wearables.”

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Fitness accounted for roughly 25% of first quarter 2024 sales. Garmin’s outdoor unit jumped 11% in Q1 as demand for its advanced handheld GPS systems and wearables climbed to make up 27% of total revenue (the most of its five reported segments).

GRMN’s portfolio spans far beyond its more consumer-heavy efforts. The Switzerland-headquartered firm is an innovator across aviation and marine, rolling out various cutting edge and essential technologies. Garmin makes sonar, radars, autopilot systems, and other crucial and cutting-edge tech for various types and sizes of boats.

Meanwhile, its aviation business spans general, business, government & defense, helicopters, and experimental aircraft, with offerings such as flight decks & displays, autopilot, navigation & radios, and much more.

GRMN’s aviation unit popped 2% in the first quarter (16% of revenue), while marine jumped 17% on the back of its JL Audio acquisition (making up 24% of sales). Garmin’s auto OEM unit soared 58% last quarter, fueled by large shipments to BMW.

Growth Outlook

Garmin posted record first-quarter revenue across four of its five segments helping boost total sales by 20%. This came after GRMN’s 8% top-line expansion in 2023 following a small 2.5% downturn in 2022. The company averaged 14% revenue growth between 2019 and 2021.

Garmin’s top-line strength and improving margins helped it boost its adjusted first quarter earnings by 39% to beat our bottom line estimate by 42%. The company’s earnings outlook has soared since its May 1 release, especially for 2025.

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GRMN’s FY25 consensus EPS estimate for FY25 has popped nearly 11% since its report. Garmin’s most accurate/recent EPS estimates topped our current consensus for both FY24 and FY25 to help it land a Zacks Rank #1 (Strong Buy).  

Garmin is projected to post 13% revenue growth in 2024 and 9% higher sales next year to help boost its bottom line by 3% and 13%, respectively.

Other Fundamentals

Garmin has climbed 26% YTD, including a 12% run since its May report. The stock has surged roughly 54% in the last two years to match the Zacks tech sector. Even though GRMN has skyrocketed over 100% off its October 2022 lows, it still trades around 10% below its 2021 peaks.

Garmin has pulled back since its post-release pop to trade slightly below its 21-day moving average. The stock also fell from heavily overbought RSI levels to below neutral. GRMN might face more near-term profit-taking to help it cool down following its run.

Yet, Garmin appears to be starting what could be a long-term ride higher to reach new all-time highs since it recently experienced a long-term golden cross, with the 50-week trendline passing above the 200-week.

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On the valuation side, Garmin trades at a slight discount to the Tech sector at 26.7X forward 12-month earnings. GRMN is trading at a 15% discount to its highs.  

Garmin pays a dividend that yields 1.80% at the moment. GRMN plans to raise its dividend payout if shareholders approve the measure at its annual meeting on June 7. On top of that, GRMN in February authorized a $300 million share repurchase program.

Bottom Line

Garmin’s stellar balance sheet, which includes $2.20 billion in cash and equivalents and $8.6 billion in total assets vs. $1.4 billion in total liabilities and zero debt, helps support buybacks and its dividend.

Garmin remains a major player in consumer-facing segments despite mounting competition because its offerings are often best-in-class. The company is also a standout across aviation and marine, with the ability to innovate in-house and through acquisitions.  

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