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Garmin (GRMN) Down 0.3% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Garmin (GRMN - Free Report) . Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Garmin due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Garmin's Q2 Earnings & Sales Beat Estimates
Garmin reported second-quarter 2023 pro-forma earnings of $1.45 per share, beating the Zacks Consensus Estimate by 1.4%. The bottom line improved by 1% on a year-over-year basis.
Net sales were $1.32 billion, which surpassed the Zacks Consensus Estimate of $1.28 billion. The figure increased by 6% from the year-ago quarter’s figure.
The year-over-year growth in the top line was attributed to strength in Fitness and Auto OEM segments. The growing Aviation segment contributed well.
However, GRMN witnessed weak momentum in the Outdoor and Marine segments in the second 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 (33.9% of net sales): The segment generated sales of $448.1 million in the reported quarter, decreasing 3% year over year due to sluggishness in multiple product categories. Nevertheless, the company witnessed growth in adventure watches.
Fitness (25.4%): The segment generated sales of $334.9 million, which increased 23% from the year-ago quarter’s level, owing to solid demand for the company’s advanced wearables.
Aviation (16.4%): The segment generated sales of $217.4 million, increasing 6% on a year-over-year basis. This was driven by solid momentum in OEM categories.
Marine (16.3%): Garmin generated sales of $215.8 million from the segment, decreasing 11% on a year-over-year basis. This was attributed to the unfavorable timing of promotions.
Auto OEM (8%): The segment generated sales of $104.6 million, up 77% from the prior-year quarter’s level. The growing shipment of domain controllers contributed well.
Operating Results
In the second quarter, the gross margin was 57.5%, which contracted 120 basis points (bps) from the year-ago period’s level.
Garmin’s operating expenses of $475.1 million were up 8.9% from the prior-year quarter’s level. As a percentage of revenues, the figure expanded 80 bps year over year to 35.9%.
The operating margin was 21.5% in the reported quarter, which contracted 210 bps year over year.
Balance Sheet & Cash Flow
As of Jul 1, 2023, cash, cash equivalents and marketable securities were $1.68 billion, up from $1.55 billion as of Apr 1, 2023.
In the second quarter, inventories were $1.4 billion compared with $1.5 billion in the previous quarter. We note that GRMN had no long-term debt for the reported quarter.
GRMN generated $273.7 million in cash from operations in the reported quarter compared with $279.2 million in the previous quarter.
The company generated a free cash flow of $221.2 million.
Garmin paid out dividends worth $140 million and repurchased shares worth $26 million in the reported quarter.
2023 Guidance
GRMN raised its guidance for 2023 revenues from $5 billion to $5.05 billion.
The company expects pro-forma earnings of $5.15 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Garmin has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Garmin has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Garmin belongs to the Zacks Electronics - Miscellaneous Products industry. Another stock from the same industry, Flex (FLEX - Free Report) , has gained 3.3% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Flex reported revenues of $7.34 billion in the last reported quarter, representing a year-over-year change of -0.2%. EPS of $0.57 for the same period compares with $0.54 a year ago.
Flex is expected to post earnings of $0.58 per share for the current quarter, representing a year-over-year change of -7.9%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Flex. Also, the stock has a VGM Score of B.
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Garmin (GRMN) Down 0.3% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Garmin (GRMN - Free Report) . Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Garmin due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Garmin's Q2 Earnings & Sales Beat Estimates
Garmin reported second-quarter 2023 pro-forma earnings of $1.45 per share, beating the Zacks Consensus Estimate by 1.4%. The bottom line improved by 1% on a year-over-year basis.
Net sales were $1.32 billion, which surpassed the Zacks Consensus Estimate of $1.28 billion. The figure increased by 6% from the year-ago quarter’s figure.
The year-over-year growth in the top line was attributed to strength in Fitness and Auto OEM segments. The growing Aviation segment contributed well.
However, GRMN witnessed weak momentum in the Outdoor and Marine segments in the second 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 (33.9% of net sales): The segment generated sales of $448.1 million in the reported quarter, decreasing 3% year over year due to sluggishness in multiple product categories. Nevertheless, the company witnessed growth in adventure watches.
Fitness (25.4%): The segment generated sales of $334.9 million, which increased 23% from the year-ago quarter’s level, owing to solid demand for the company’s advanced wearables.
Aviation (16.4%): The segment generated sales of $217.4 million, increasing 6% on a year-over-year basis. This was driven by solid momentum in OEM categories.
Marine (16.3%): Garmin generated sales of $215.8 million from the segment, decreasing 11% on a year-over-year basis. This was attributed to the unfavorable timing of promotions.
Auto OEM (8%): The segment generated sales of $104.6 million, up 77% from the prior-year quarter’s level. The growing shipment of domain controllers contributed well.
Operating Results
In the second quarter, the gross margin was 57.5%, which contracted 120 basis points (bps) from the year-ago period’s level.
Garmin’s operating expenses of $475.1 million were up 8.9% from the prior-year quarter’s level. As a percentage of revenues, the figure expanded 80 bps year over year to 35.9%.
The operating margin was 21.5% in the reported quarter, which contracted 210 bps year over year.
Balance Sheet & Cash Flow
As of Jul 1, 2023, cash, cash equivalents and marketable securities were $1.68 billion, up from $1.55 billion as of Apr 1, 2023.
In the second quarter, inventories were $1.4 billion compared with $1.5 billion in the previous quarter. We note that GRMN had no long-term debt for the reported quarter.
GRMN generated $273.7 million in cash from operations in the reported quarter compared with $279.2 million in the previous quarter.
The company generated a free cash flow of $221.2 million.
Garmin paid out dividends worth $140 million and repurchased shares worth $26 million in the reported quarter.
2023 Guidance
GRMN raised its guidance for 2023 revenues from $5 billion to $5.05 billion.
The company expects pro-forma earnings of $5.15 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Garmin has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Garmin has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Garmin belongs to the Zacks Electronics - Miscellaneous Products industry. Another stock from the same industry, Flex (FLEX - Free Report) , has gained 3.3% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Flex reported revenues of $7.34 billion in the last reported quarter, representing a year-over-year change of -0.2%. EPS of $0.57 for the same period compares with $0.54 a year ago.
Flex is expected to post earnings of $0.58 per share for the current quarter, representing a year-over-year change of -7.9%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Flex. Also, the stock has a VGM Score of B.