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Garmin (GRMN) Q2 Earnings & Sales Beat Estimates, Rise Y/Y

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Garmin Ltd. (GRMN - Free Report) has reported second-quarter 2021 pro-forma earnings of $1.68 per share, beating the Zacks Consensus Estimate by 36.6%. The bottom line improved 85% on a year-over-year basis.

Net sales were $1.33 billion, which surpassed the Zacks Consensus Estimate of $1.07 million. The figure increased 53% from the year-ago quarter.

Top-line growth was driven by strong performance delivered by the company’s marine, outdoor, auto, aviation and fitness segments.

Garmin’s strong focus on continued innovation, diversification and market expansion to explore opportunities across all business segments remains a major positive. Its strong product lines are expected to aid its performance in the near term.

Segmental Details

Outdoor (24.4% of net sales): The segment generated sales of $323.4 million in the reported quarter, improving 57% year over year. The year-over-year increase was primarily driven by robust demand for Garmin’s adventure watches.

Fitness (31.1%): The segment generated sales of $413.2 million, which increased 40% from the year-ago quarter. This can be primarily attributed to its well-performing advanced wearables and cycling products.

Aviation (13.6%): The segment generated sales of $180.8 million, increasing 43% on a year-over-year basis. This was driven by solid momentum across OEM and aftermarket products.

Marine (19.8%): Garmin generated sales of $261.8 million from the segment, increasing 66% on a year-over-year basis. The company witnessed solid momentum across chartplotters in the reported quarter, which, in turn, drove the segment’s revenues.

Auto (11.1%): The segment generated sales of $147.7 million, up 74% from the prior-year quarter. This was primarily driven by strengthening momentum across consumer auto products and new OEM programs.

Operating Results

In the second quarter, the gross margin was 58.8%, which contracted 50 basis points (bps) from the year-ago period.

The company’s operating expenses of $409.7 million were up 25.3% from the prior-year quarter. However, as a percentage of revenues, the figure contracted 670 bps year over year to 30.9%.

Operating margin of 28% in the reported quarter expanded 630 bps year over year.

Balance Sheet & Cash Flow

As of Jun 26, 2021, cash, cash equivalents and marketable securities were $1.97 billion, higher than $1.94 billion as of Mar 27, 2021.

In the second quarter, inventories were $938.6 million compared with $837.9 million in the fourth quarter. We note that the company had no long-term debt for the reported quarter.

It generated $229.7 million in cash from operations in the reported quarter compared with $368.4 million in the previous quarter.

The company generated free cash flow of $120.03 million.

2021 Guidance

The company raised the guidance for net sales from $4.6 billion to $4.9 billion. The Zacks Consensus Estimate for 2021 net sales is pegged at $4.68 billion.

Garmin raised the guidance for pro-forma earnings from $5.15 per share to $5.50 per share. The consensus mark for 2021 earnings is pegged at $5.36 per share.

The company has revised the guidance for gross margin downward from 59.2% to 58.5%. The operating margin guidance got revised upward from 23.5% to 23.8%.

Zacks Rank and Other Stocks to Consider

Currently, Garmin carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector are KLA (KLAC - Free Report) , Carrier Global (CARR - Free Report) and Trimble (TRMB - Free Report) . All three companies currently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Both KLA and Carrier Global are scheduled to report quarterly earnings on Jul 29, whereas Trimble is slated to report results on Aug 4.

In-Depth Zacks Research for the Tickers Above

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