Back to top

Image: Bigstock

Garmin (GRMN) Up 2.8% Since Last Earnings Report: Can It Continue?

Read MoreHide Full Article

A month has gone by since the last earnings report for Garmin (GRMN - Free Report) . Shares have added about 2.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Garmin due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Garmin Q4 Earnings & Sales Beat Estimates

Garmin has reported fourth-quarter 2021 pro-forma earnings of $1.55 per share, beating the Zacks Consensus Estimate by 9.9%.

However, the bottom line declined 10% on a year-over-year basis.

Net sales were $1.39 billion, which surpassed the Zacks Consensus Estimate of $1.37 million. The figure increased 3% from the year-ago quarter.

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

However, the company witnessed sluggishness in the fitness and outdoor segments in the reported quarter.

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 (27.2% of net sales): The segment generated sales of $378.2 million in the reported quarter, declining 8% year over year. This was due to component constraints.

Fitness (33.8%): The segment generated sales of $470.1 million, which decreased 0.1% from the year-ago quarter due to declining sales of cycling products. Nevertheless, the company witnessed the solid adoption of advanced wearable products.

Aviation (12.8%): The segment generated sales of $177.6 million, increasing 13% on a year-over-year basis. This was driven by solid momentum across the OEM category.

Marine (14%): Garmin generated sales of $196.4 million from the segment, increasing 14% on a year-over-year basis. The company witnessed solid demand for chart plotters in the reported quarter, which, in turn, drove the segment’s revenues.

Auto (12.2%): The segment generated sales of $169.2 million, up 21% from the prior-year quarter. This was primarily driven by strengthening momentum across auto OEM programs and consumer auto products.

Operating Results

In the fourth quarter, the gross margin was 55.5%, which contracted 300 basis points (bps) from the year-ago period.

The company’s operating expenses of $456.9 million were up 8.9% from the prior-year quarter. As a percentage of revenues, the figure expanded 170 bps year over year to 32.8%.

The operating margin of 22.6% in the reported quarter contracted 490 bps year over year.

Balance Sheet & Cash Flow

As of Dec 25, 2021, cash, cash equivalents and marketable securities were $1.49 billion, lower than $1.98 billion as of Sep 25, 2021.

In the fourth quarter, inventories were $1.2 billion compared with $1.1 billion in the third quarter. We note that the company had no long-term debt for the reported quarter.

It generated $168.9 million in cash from operations in the reported quarter compared with $245.4 million in the previous quarter.

Garmin generated a free cash flow of $49.3 million.

2022 Guidance

The company projects revenues of $5.5 billion.

Garmin expects pro-forma earnings of $5.90 per share for 2022.

The company anticipates the gross margin and operating margin of 57.5% and 22.8%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

The consensus estimate has shifted -7.11% due to these changes.

VGM Scores

At this time, Garmin has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Garmin has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Garmin Ltd. (GRMN) - free report >>

Published in