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Garmin's (GRMN) Earnings Beat, Sales Lag Estimates in Q3
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Garmin Ltd. (GRMN - Free Report) reported third-quarter 2022 pro-forma earnings of $1.24 per share, beating the Zacks Consensus Estimate by 12.7%. However, the bottom line declined 12% on a year-over-year basis.
Net sales were $1.14 billion, which lagged the Zacks Consensus Estimate of $1.18 million. The figure decreased 4% from the year-ago quarter’s figure.
The year-over-year decline in the top line was attributed to sluggishness across the fitness, marine and auto segments.
Nevertheless, GRMN witnessed growth in outdoor and aviation 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.
Outdoor (30% of net sales): The segment generated sales of $340.4 million in the reported quarter, increasing 5% year over year. This was driven by solid demand for Garmin’s adventure watches and the growing adoption of inReach devices and services.
Fitness (24.5%): The segment generated sales of $279.9 million, which decreased 18% from the year-ago quarter’s level due to declining sales of indoor cycling and advanced wellness products.
Aviation (16.5%): The segment generated sales of $188.04 million, increasing 4% on a year-over-year basis. This was driven by solid momentum across the aftermarket category.
Marine (17%): Garmin generated sales of $196.5 million from the segment, decreasing 5% on a year-over-year basis. This was attributed to seasonal factors.
Auto (12%): The segment generated sales of $135.6 million, down 2% from the prior-year quarter’s level. This was primarily due to the weak consumer auto products sales.
Operating Results
In the third quarter, the gross margin was 58.8%, which expanded 40 basis points (bps) from the year-ago period’s level.
Garmin’s operating expenses of $431.13 million were up 4.3% from the prior-year quarter’s level. As a percentage of revenues, the figure expanded 310 bps year over year to 37.8%.
The operating margin was 21% in the reported quarter, which contracted 270 bps year over year.
Balance Sheet & Cash Flow
As of Sep 24, 2022, cash, cash equivalents and marketable securities were $1.5 billion, lower than $1.6 billion as of Jun 25, 2022.
In the third quarter, inventories were $1.5 billion compared with $1.4 billion in the previous quarter. We note that GRMN had no long-term debt for the reported quarter.
GRMN generated $154.1 million of cash from operations in the reported quarter compared with $79.8 million in the previous quarter.
Garmin generated a free cash flow of $103.99 million.
GRMN paid out dividends worth $141 million and repurchased shares worth $83 million in the reported quarter.
2022 Guidance
GRMN lowered its revenue guidance from $5 billion to $4.85 billion. The Zacks Consensus Estimate for 2022 net sales is pegged at $5.47 billion.
Garmin raised its expectation for pro-forma earnings from $4.90 per share to $4.95. The consensus mark for 2022 earnings is pegged at $5.90 per share.
Management anticipates gross and operating margins of 57.5% and 20.7% each. The previous guidance was 56.7% and 20%, respectively.
Image: Bigstock
Garmin's (GRMN) Earnings Beat, Sales Lag Estimates in Q3
Garmin Ltd. (GRMN - Free Report) reported third-quarter 2022 pro-forma earnings of $1.24 per share, beating the Zacks Consensus Estimate by 12.7%. However, the bottom line declined 12% on a year-over-year basis.
Net sales were $1.14 billion, which lagged the Zacks Consensus Estimate of $1.18 million. The figure decreased 4% from the year-ago quarter’s figure.
The year-over-year decline in the top line was attributed to sluggishness across the fitness, marine and auto segments.
Nevertheless, GRMN witnessed growth in outdoor and aviation 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.
Garmin Ltd. Price, Consensus and EPS Surprise
Garmin Ltd. price-consensus-eps-surprise-chart | Garmin Ltd. Quote
Segmental Details
Outdoor (30% of net sales): The segment generated sales of $340.4 million in the reported quarter, increasing 5% year over year. This was driven by solid demand for Garmin’s adventure watches and the growing adoption of inReach devices and services.
Fitness (24.5%): The segment generated sales of $279.9 million, which decreased 18% from the year-ago quarter’s level due to declining sales of indoor cycling and advanced wellness products.
Aviation (16.5%): The segment generated sales of $188.04 million, increasing 4% on a year-over-year basis. This was driven by solid momentum across the aftermarket category.
Marine (17%): Garmin generated sales of $196.5 million from the segment, decreasing 5% on a year-over-year basis. This was attributed to seasonal factors.
Auto (12%): The segment generated sales of $135.6 million, down 2% from the prior-year quarter’s level. This was primarily due to the weak consumer auto products sales.
Operating Results
In the third quarter, the gross margin was 58.8%, which expanded 40 basis points (bps) from the year-ago period’s level.
Garmin’s operating expenses of $431.13 million were up 4.3% from the prior-year quarter’s level. As a percentage of revenues, the figure expanded 310 bps year over year to 37.8%.
The operating margin was 21% in the reported quarter, which contracted 270 bps year over year.
Balance Sheet & Cash Flow
As of Sep 24, 2022, cash, cash equivalents and marketable securities were $1.5 billion, lower than $1.6 billion as of Jun 25, 2022.
In the third quarter, inventories were $1.5 billion compared with $1.4 billion in the previous quarter. We note that GRMN had no long-term debt for the reported quarter.
GRMN generated $154.1 million of cash from operations in the reported quarter compared with $79.8 million in the previous quarter.
Garmin generated a free cash flow of $103.99 million.
GRMN paid out dividends worth $141 million and repurchased shares worth $83 million in the reported quarter.
2022 Guidance
GRMN lowered its revenue guidance from $5 billion to $4.85 billion. The Zacks Consensus Estimate for 2022 net sales is pegged at $5.47 billion.
Garmin raised its expectation for pro-forma earnings from $4.90 per share to $4.95. The consensus mark for 2022 earnings is pegged at $5.90 per share.
Management anticipates gross and operating margins of 57.5% and 20.7% each. The previous guidance was 56.7% and 20%, respectively.
Zacks Rank and Stocks to Consider
Currently, Garmin carries a Zacks Rank #4 (Sell).
Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Asure Software (ASUR - Free Report) , Aspen Technology (AZPN - Free Report) and Amdocs (DOX - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Asure Software has lost 14% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 32.8%.
Aspen Technology has returned 62.4% in the year-to-date period. The long-term earnings growth rate for AZPN is currently projected at 18.2%.
Amdocs has gained 8.9% in the year-to-date period. The long-term earnings growth rate for DOX is currently projected at 11.5%.