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Garmin (GRMN) Q3 Earnings Beat Estimates, Sales Rise Y/Y

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Garmin Ltd. (GRMN - Free Report) has reported third-quarter 2021 pro-forma earnings of $1.41 per share, beating the Zacks Consensus Estimate by 11.02%.

However, the bottom line declined 11% on a year-over-year basis.

Net sales were $1.19 billion, which surpassed the Zacks Consensus Estimate of $1.15 million. The figure increased 7% from the year-ago quarter.

Top-line growth was driven by the strong performance delivered by the company’s marine, 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.

Garmin Ltd. Price, Consensus and EPS Surprise

Garmin Ltd. Price, Consensus and EPS Surprise

Garmin Ltd. price-consensus-eps-surprise-chart | Garmin Ltd. Quote

Segmental Details

Outdoor (27.2% of net sales): The segment generated sales of $323.9 million in the reported quarter, declining 3% year over year. This was attributed to last year’s timing of product launches.

Fitness (28.7%): The segment generated sales of $342.3 million, which increased 4% from the year-ago quarter. This can be primarily attributed to its well-performing advanced wearables and cycling products.

Aviation (15.1%): The segment generated sales of $180.2 million, increasing 19% on a year-over-year basis. This was driven by a solid momentum across OEM and aftermarket products.

Marine (17.4%): Garmin generated sales of $207.5 million from the segment, increasing 25% 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 (11.6%): The segment generated sales of $138.1 million, up 7% from the prior-year quarter. This was primarily driven by strengthening momentum across auto OEM programs.

Operating Results

In the third quarter, the gross margin was 58.4%, which contracted 180 basis points (bps) from the year-ago period.

The company’s operating expenses of $413.3 million were up 17.8% from the prior-year quarter. As a percentage of revenues, the figure expanded 310 bps year over year to 34.7%.

The operating margin of 23.7% in the reported quarter contracted 490 bps year over year.

Balance Sheet & Cash Flow

As of Sep 25, 2021, cash, cash equivalents and marketable securities were $1.98 billion, higher than $1.97 billion as of Jun 26, 2021.

In the third quarter, inventories were $1.11 billion compared with $938.6 million in the second quarter. We note that the company had no long-term debt for the reported quarter.

It generated $245.4 million in cash from operations in the reported quarter compared with $229.7 million in the previous quarter.

The company generated a free cash flow of $204.01 million.

Garmin paid out dividends worth $129 million to shareholders in the third quarter.

2021 Guidance

The company raised the guidance for net sales from $4.9 billion to $4.95 billion. The Zacks Consensus Estimate for 2021 net sales is pegged at $4.94 billion.

Garmin raised the guidance for pro-forma earnings from $5.50 per share to $5.60 per share. The consensus mark for 2021 earnings is pegged at $5.60 per share.

The company has revised the guidance for the operating margin upward from 23.8% to 24%. The gross margin guidance has been revised downward from 58.5% to 58.2%.

Zacks Rank and Other Stocks to Consider

Currently, Garmin carries a Zacks Rank #3 (Hold).

Some other top-ranked stocks in the broader technology sector are Lam Research (LRCX - Free Report) , Coupa Software, Inc. (COUP - Free Report) and Trimble Inc. (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.    

The long-term earnings growth rates of Lam Research, Coupa Software and Trimble are pegged at 17.01%, 24.28% and 10%, respectively.