Garmin Ltd. (GRMN) on Q3 2021 Results - Earnings Call Transcript

Operator: Good day and thank you for standing by. Welcome to the Garmin Limited Third Quarter 2021 Earnings Conference Call. I would now like to hand the conference over to your first speaker today, Ms. Teri Seck, Manager of Investor Relations. Ma’am, please go ahead. Teri Seck: Good morning. We would like to welcome you to Garmin Limited third quarter 2021 earnings call. Please note that the earnings press release and related slides are available at Garmin’s Investor Relations site at www.garmin.com/stock. An archive of the webcast and related transcript will also be available on our website. This earning call includes projections and other forward-looking statements regarding Garmin Limited and its business. Any statements regarding our future financial position, revenues, earnings, gross margins, operating margins, future dividends, market shares, product introductions, future demand for our products and plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this earnings call may not occur and actual results could differ materially as a result of risk factors affecting Garmin. Information concerning these risk factors is contained in our Form 10-K and Form 10-Q filed with the Securities and Exchange Commission. In particular, there is significant uncertainty about the duration and impact of the COVID-19 pandemic. This means that results could change at anytime and any statement about the impact of COVID-19 on the company’s business results and outlook is the best estimate based on the information available as of today’s date. Presenting on behalf of Garmin Limited this morning are Cliff Pemble, President and Chief Executive Officer and Doug Boessen, Chief Financial Officer and Treasurer. At this time, I would like to turn the call over to Cliff Pemble. Cliff Pemble: Thank you, Teri and good morning everyone. As announced earlier today, Garmin reported record revenue of $1.2 billion for the third quarter, increasing 7% over the pandemic fuel levels we achieved in the prior year. Operating income declined year-over-year to $283 million due to a combination of higher freight costs affecting gross margin and increased expenses as we invest in R&D, information technology and marketing initiatives. Operating margin was very strong at 23.7%. There are two things to consider when looking at our performance in the back half of the year. First, financial comparisons to the prior year are more challenging due to the pandemic-driven demand and retail disruptions of 2020. Also, we are facing one of the most challenging supply chain environments in history. Our vertically integrated business model and commitment to safety stock was a key factor driving revenue growth for the quarter, but supplies are tight and we expect freight costs to remain elevated as we rush to fill retail shelves in time for the important holiday selling season. I am pleased with what we have accomplished in this tough environment, and I am very proud of our team who worked tirelessly to maintain continuity supply from our factories to customers. Last time, I mentioned that we invested in a fourth production facility in Taiwan. I am pleased to report that this facility is operational and will help us fill more orders during the important holiday selling season. Given our strong performance in the first three quarters of the year, we are updating our full year guidance. We now anticipate revenue of approximately $4.95 billion, up 18% over the prior year, with double-digit growth expected in each of our five business segments. In a moment, Doug will provide more details on our financial results and updated guidance, but first, I will provide a few highlights for each business segment. Starting with fitness, revenue increased 4% to $342 million, with growth driven primarily by cycling products and advanced wearables. Our Connect IQ development platform is a strong differentiator for us and we are deploying it across a broader range of Garmin devices. We recently held our Fifth Annual Developer Conference, where we announced a partnership with Dexcom to deliver real-time glucose information via a Connect IQ app on selected smartwatches and cycling computers, even during activities. Fitness segment revenue has grown 26% year-to-date and we are maintaining our revenue growth estimate of 17% for the year. Moving to outdoor, revenue decreased 3% to $324 million. The decrease in revenue is due to the strong sell-in activity associated with the launch of our solar adventure watches in the prior year quarter and limited supplies of traditional handheld and dog products in the current quarter. During the quarter, we launched the Approach R10, our first portable golf monitor. The R10 can be used on course or at home to help golfers improve their game with more than a dozen key metrics shown in real time. Customers are very enthusiastic about the R10 and it’s on its way to becoming another halo product for Garmin. Outdoor segment revenue has grown 26% year-to-date and we are maintaining our growth estimate of 17% for the year. Looking next at Aviation, revenue increased 19% to $180 million, with growth in both OEM and aftermarket product categories. During the quarter, we were ranked number one in avionics product support by Aviation International News for the 18th consecutive year. Being consistently recognized for unrivaled support year after year clearly shows our strategic focus on taking care of customers and standing behind our products. We launched Smart Glide, a game changing safety feature inspired by Autoland technology that will help pilots manage loss of engine power by automatically flying the optimal glide ratio and navigating to the best available airport. Also in the quarter, we announced the certification of the GFC 600H flight control system on the Bell 505 helicopter. This advanced autopilot includes state-of-the-art safety features, such as electronic stability control and a hover-assist mode. We are pleased with how the Aviation segment has recovered so far this year and now expect full year revenue guidance to increase approximately 12%. Turning next to the Marine segment, revenue increased 25% to $208 million, with growth across multiple categories, led by chartplotters. We continue to be recognized for innovation and achievements in the marine industry. For the seventh consecutive year, the National Marine Electronics Association named Garmin Manufacturer of the Year, and we also received 5 Product of Excellence awards. During the quarter, we introduced Surround View, the industry’s first intelligent camera system that provides a 360-degree bird’s eye view around the vessel. We also announced our partnership with Malibu Boats. Our 7-inch touchscreen displays will be standard equipment across the Malibu Axis boat line, beginning with the 2022 model year. Given the strong year-to-date performance on the Marine segment, we are raising our revenue growth estimate to 30% for the year. And looking finally at auto, revenue increased 7% to $138 million, with growth primarily driven by OEM programs. During the quarter, we began production shipments of the BMW computing module from our Olathe, Kansas manufacturing facility and we delivered prototypes of the next-generation BMW system from our new manufacturing facility located in Poland. We also recently announced a refreshed lineup of Drive navigators for the consumer auto segment. These devices offer larger, higher resolution displays as well as enhanced connected features. Given the strong year-to-date performance of the auto segment, we are raising our revenue growth estimate to 17% for the year. That concludes my remarks. Next, Doug will walk you through additional details on our financial results and updated guidance. Doug? Doug Boessen: Thanks, Cliff. Good morning, everyone. I begin by reviewing our third quarter financial results, provide comments on the balance sheet, cash flow statement, taxes, our updated guidance. We posted revenue of $1.192 billion for the third quarter, representing a 7% increase year-over-year. Gross margin was 58.4%, 180 basis point decrease compared to prior year quarter. The decrease was primarily due to higher freight costs. Operating expense as a percentage of sales was 34.7%, 310 basis point increase to the prior year quarter. Operating income was $283 million, 11% decrease. Operating margin was 23.7%, a 290 basis point decrease. Our GAAP EPS was $1.34. Pro forma EPS was $1.41. Next, with our third quarter revenue by segment, we have a highly diverse business model, provides a rich set of opportunities, reduce our reliance on single markets and product lines. In the third quarter, we achieved growth in 4 or 5 segments, double-digit growth in both Marine and Aviation. Fitness is our largest segment, contributing 29% of the sales in the third quarter, followed by outdoor at 27%. Moving to our revenue by geography, Americas and EMEA regions grew 10% and 9%, respectively, with APAC region decreased 2%. The Americas region contributed nearly one-half of our revenue, the remaining coming from the EMEA and APAC regions. Looking next, operating expenses. Third quarter operating expenses increased by $62 million or 18%. Research and development increased $39 million year-over-year, primarily due to engineering personnel costs. SG&A increased $21 million compared to prior year quarter, primarily due to increases in personnel-related expenses, information technology costs. Our advertising expense increased approximately $3 million due to higher media spend. A few highlights on the balance sheet, cash flow statement and taxes. We ended the quarter with cash and marketable securities were $3.2 billion. Accounts receivable decreased sequentially and year-over-year to $639 million. Inventory balance increased, both a sequential year-over-year basis, to $1.1 billion, primarily due to raw material requirements in preparation for the seasonally strong fourth quarter. During the third quarter 2021, we generated free cash flow of $204 million, a $32 million decrease compared to prior quarter. Capital expenditures for the third quarter were $41 million. We expect full year 2021 free cash flow to be approximately $750 million, capital expenditures of approximately $325 million in the third quarter of 2021 for an effective tax rate of 5.9% compared to 6.9% in the prior year. The decrease was primarily due to impact return provision adjustments associated with filing the U.S. tax return. Turning next to our full year guidance, we estimate revenue of approximately $4.95 billion, increase of 18% for the prior year, double-digit growth in each of our segments. We expect gross margin to be approximately 58.2%, which is lower than our previous guidance, 58.5%, due to higher freight costs. We expect an operating margin of approximately 24%. Also, we expect the full year 2021 pro forma effective tax rate to be approximately 11.5%, which results in pro forma earnings per share of approximately $5.60. This concludes our formal remarks. Rachel, can you please open the line for Q&A? Operator: Thank you. Our first question comes from the line of Paul Chung from JPMorgan. Please proceed with your question. Paul Chung: Hi, thanks for taking my question. So just on Aviation. 4Q implied guide kind of suggests a sequential downtick. You typically see an uptick in 4Q. So what’s going on there? Is that an impact from supply chain headwinds? And then on op margins, it stabilized in 3Q, but you still remain well below that low-30s range you’ve seen historically. So is this the right level to think about moving forward? Or is there also some transitory hits in the near-term? Cliff Pemble: Yes. Thanks, Paul. I think certainly, there is some noise associated with aviation in the prior year versus this year as well. So part of it is timing of shipments that occurred from year-to-year, but also lead times on equipment and aviation is getting longer. So we’re accounting for that and wanting to make sure that we’re taking into account all of those factors that might affect Q4 revenue. Paul Chung: Thanks. And then as we think about next year in the context of pretty strong business jet demand, do you see this business growing along with the industry or at a faster pace given kind of the new certifications, auto land and Smart Glide that you’ve introduced? Cliff Pemble: Yes. I think we have the most innovative product line, for sure. So across aftermarket and OEM, we’re well positioned with our products and on the platforms that are the most popular. The most significant interest in business jet demand right now is in the sweet spot of where our products are installed. So I would expect that we would continue to perform well as the industry performs. Paul Chung: Okay. Great. And then lastly, inventory balances have increased as you signal. How comfortable are you heading into the holiday season with supply components, logistics? And then separately, as we head into fiscal year ‘22, how should we think about working cap, particularly in inventory, you’re going to have a bigger harvest. And then the pace of CapEx in ‘22 would be helpful as well. Thank you. Cliff Pemble: Yes, I’ll just make a comment on the general inventory, and then ask Doug to finish the other parts of your question. But in this environment, I think inventory is definitely a positive thing. And we’ve been able to secure the kind of inventory that we feel we need to make for a successful year. I think nobody would ever say they have too much in this environment. And with shipping delays that are taking place that we hear of every day in the news, definitely a higher level of inventory as required. So Doug? Doug Boessen: Yes. First, regarding free cash flow and inventory levels, as Cliff mentioned, we will be continuing to keep our inventory levels at the appropriate level to meet our demand. So there will be increased levels at year-end with that. As it relates to CapEx, our forecast for the current year is $325 million. There is a number of projects that we do have in place for that. So we do expect some elevated CapEx going into 2022. So those things will need to be factored into free cash flow when we come up to 2022 relating to the inventory levels as well as CapEx. Paul Chung: Thank you. Cliff Pemble: Thank you. Operator: Thank you. Your next question comes from the line of Ben Bollin from Cleveland Research. Your line is open. Ben Bollin: Good morning. Thanks for taking the question. Cliff, I was hoping we could talk a little bit about how you think about the advanced wearables business near-term, longer term within Fitness and Outdoor, in particular? Any thoughts you have on – maybe you saw some pull forward during COVID. How significant do you think that might have been versus kind of broader secular category growth? Also interested in any thoughts you have on sell-in inventory stocking versus like sell-through performance and where channel inventory you feel is today versus maybe history? Cliff Pemble: Yes. So I would say in terms of the general performance of those categories over the past nearly 2 years now, certainly, there was a lot of pandemic-related interest in those products in the early part of the pandemic cycle. That interest, of course, still remains very strong, and we believe, as the industry has reported that there is still a lot of growth potential in the wearables market, I think we’re positioned really well in that market because we are differentiating ourselves around the active lifestyles theme. So everything we do with our products has a purpose and is built for purpose. In terms of sell-in versus sell-through, I think we can definitely see those trends with our product registrations, and we feel like the sell-in and sell-through is matched very well at this point. And the inventory levels in the channel are better than they have been, although, again, depending on product lines, there can be pockets of imbalances here and there. Ben Bollin: And then the other question I have is just in regards to calendar 4Q this year versus prior years. Have you seen any notable changes either in timing around retailer commitments as they prepare for the holidays? Any thoughts around the promotional environment versus prior years and anything along the lines with consumer behavior? Do you think they are shopping earlier versus prior? And that’s it. Thank you. Cliff Pemble: Yes. So in terms of our Q4 versus prior years, last year, I think the market was still very distorted with many retailers starting to reopen or figure out how to open in light of the pandemic, and their inventories and online warehouses were very much depleted. So we’re still seeing that pandemic-driven spike on a year-over-year comparison basis. In terms of promotional environment this year, I would say that things feel like they are getting a little bit back to normal, although it remains to be seen. I would say that there is not a rush as far as we can see that everyone is trying to shop early. There is obviously reports of that in light of the general inventory situation you see with products on the market. But in general, I would say that it’s looking more normal in the seasonality of the business. Ben Bollin: Thank you. Operator: Your next question comes from the line of Will Power from Baird. Please, proceed with your question. Will Power: Okay, great. Yes, I guess a couple of questions. First, I was hoping to come back just to some of the supply chain commentary. And I guess just trying to better understand and, if possible, where you’re seeing the primary impacts? What segments, I guess, in particular? And how you’re thinking about the overall impact in Q4 versus what you saw in Q3? Do you expect it to get worse? Is it stabilizing? Just some broader views on that front would be great. Cliff Pemble: Okay. Yes, I would say that the supply chain environment, as I mentioned earlier in my remarks, is really tough. We’re handling thousands of components on a day-to-day basis and managing the inflow and the use of those components and, in some case, allocating how they are allocated to product manufacturing. But in terms of our Q3, I would say that definitely, we saw an impact in the Outdoor segment with regard to those products. I mentioned the dog products and the traditional handheld. But for the most part, across the business, we’re doing okay and managing it again on a day-to-day basis. So that’s generally what we see. Will Power: Okay, thanks. And then a question on auto, I guess maybe two-part. As you think about the OEM segment, what’s the current thought process on margin outlook there? I know there have been investments as programs ramp up, but any thoughts as to how to think about the cadence of margins from here? And then I guess, on the consumer side, margin is down a bit year-over-year – operating margin is down a bit year-over-year. I assume that’s just something tied to mix, but any color there would be helpful, too? Thanks. Cliff Pemble: Yes. So on OEM, in the margin outlook as our business transitions to the Tier 1 manufacturing opportunities that we have been talking about, of course, those have a thinner margin on the gross margin line. So, that will definitely impact our gross margin as we develop the scale and get these programs into production. Then of course, our – what we are working towards is profitable bottom line. But again, you should think of those in terms of traditional auto OEM margin structures. On the consumer side, definitely, we saw some impact on margin there. Part of that is freight. But we also had some component costs in the consumer auto side that impacted the gross margin. Will Power: Okay. Thank you. Operator: Thank you. Your next question comes from the line of Ivan Feinseth from Tigress Financial Partners. Please proceed with your question. Ivan Feinseth: Hi. Thank you for taking my call and congratulations on good performance in a difficult time. Cliff Pemble: Thank you. Ivan Feinseth: Some of the headwinds you spoke about, freight, things like that, are you starting to see them abate, or what is your near-term outlook on some of these? Cliff Pemble: Yes. Near-term, we would say it’s an ongoing thing. We probably don’t see anything in the near to intermediate-term that really changes what’s happening right now until there is really more capacity brought into the system and some of these bottlenecks get solved. Ivan Feinseth: But maybe you have a slight increase in cost, but it’s not really disrupting your manufacturing process, right? Cliff Pemble: No. Like I have mentioned, we have managed the situation very well, probably as well as anyone could ever imagine. And I would say in this environment, of course we are very sensitive to the profitability. So, we are using this situation to reevaluate pricing of both existing products as well as new product introductions and promotions that we do in order to adjust. Ivan Feinseth: Great. And your CapEx spending, you said you are going to increase spending on R&D, IT and marketing. In what kind of R&D areas can you give some idea of what you are working on or see, like new opportunities also in your IT, what areas are you looking to invest in and improve? And what type of marketing initiatives could we expect to see going forward? Cliff Pemble: Well, in terms of R&D, one of the bigger pieces of the increase in Q3 was the investment in the auto OEM programs to bring the next-generation BMW system to the market, which we will launch later next year. And then across the business, we have had higher personnel costs as we work to retain our people and also general growth as we invest in new product categories and new markets across our segments. IT, our business is very much driven around the cloud and the online component of our products and the things that we offer. And so we are investing in the IT infrastructure that we need to support all of that business. Marketing wise, again, we have got exciting product roadmaps. And so we are working on all of those and getting ready to launch new products. Ivan Feinseth: I really like the Dexcom partnership, the integration of – into your app and wearables there. What other kind of areas can you give some idea of stuff that you are looking at? Cliff Pemble: Well, I think Connect IQ is a very versatile platform. That allows people to tap into, by far, the best hardware-based platform for wearables and purpose-driven devices that we have in cycling and outdoor traditional, those kinds of products. So, it’s a great asset for us, and we are constantly working on new opportunities to showcase Connect IQ apps with our devices. Ivan Feinseth: Okay. Thank you. Cliff Pemble: Thank you. Operator: Your next question comes from the line of Nik Todorov from Longbow Research. Please go ahead. Nik Todorov: Yes. Thanks and good morning everyone. A question on marine, I think you guys continued to perform exceptionally well there and even versus tougher comps, especially if you compare it to some of the other segments that benefited last year from COVID, like fitness and outdoor. So, can you give us some – a little bit more details on what’s driving the ability to address upside in marine? Is it ability to have better supply than competitors in gaining share, or what’s the – kind of some of the drivers there? Cliff Pemble: Well, there is a lot of moving pieces in all of that, for sure. I would say that our product line is superior and we are gaining market share with particularly some of the halo technologies that we have, such as live scope. The supply chain issue is, again, across the business. But in marine, we were able to benefit there by being able to continue to deliver products and take advantage of opportunities. And then on the OEM side of marine, they are of course, ramping up their production lines to meet the boat demand, that is still very persistent and extends, even now we are hearing into 2023 in terms of their backlog. So, we are working to support those customers, those OEM customers and support the general growth of the market that’s taking place right now. Nik Todorov: Okay. Thanks for that. And then a question on the model, Doug, maybe – I am sorry if I missed this, but you took gross margin down for the year, but then the operating margin up. So, can you share what is the offsetting factor there? Doug Boessen: Yes. It’s really leveraging operating expenses. So, looking at our operating expenses really gave that difference between the operating margin as well as the gross margin decline there. Nik Todorov: Okay. Got it. Thanks. That’s all the questions for me. Good luck guys. Cliff Pemble: Thanks Nik. Operator: Our next question comes from the line of Erik Woodring from Morgan Stanley. Your line is open. Erik Woodring: Thank you and good morning everyone. Cliff, I guess this one is just for you. I just want to be clear. Would you say, as you sit here today, obviously, we know about the supply chain challenges, but do you feel confident right now in Garmin’s ability to have products on the shelf for the holiday season? I just want to start with that one, and then I have a follow-up. Cliff Pemble: Yes. Erik Woodring: Easy enough. And half of those numbers would be… Cliff Pemble: I am not sure you heard me correctly. You said, are you confident? And I said, yes. Erik Woodring: Yes. No, that’s perfect. Second question was just if we look by geographies, APAC was noticeably weaker than North America or – and EMEA. Just curious if you could share some color there why that would be? Thanks. Cliff Pemble: Yes. In APAC, there is really two factors. One was the rolling progress of the pandemic as Delta swept through various countries across the region. And so we had some impact in the markets generally as there were more stringent lockdowns and measures taken to control the Delta spread. And then the other major factor was the timing of product introductions, particularly in outdoor. The APAC market is definitely reliant on those product introductions. And so they are comping against the very strong introduction of our solar products that we did last year in Q3. Erik Woodring: Got it. Thanks. And if I could just sneak one last one in there. Just you made those comments about the boating market, specifically the OEM market. I guess with that, the fact that backlog is potentially extending out to 2023, is it accurate to say that there might not be as weak of a off-season this year similar to last year? Is that a fair thing to say? Cliff Pemble: Well, I think the OEM part of the business is a smaller percentage compared to aftermarket. So, even if it swings to a greater degree, it’s less influential on the overall business just because of the mix of that. But that said, I would say that the seasonality of marine is a little bit more normal in the current year versus where we saw last year. So, we would expect as economies and business activity tends to normalize around the pandemic and endemic behaviors of this virus that the marine industry would also return to its normal seasonality, and we have seen some of that in Q3 and Q4. Erik Woodring: Okay. Perfect. Thank you, guys. Cliff Pemble: Yes. Thank you. Operator: I am showing no further questions at this time. I would now like to turn the conference back to Teri. Please go ahead. Teri Seck: Thanks everyone, for your time today. Have a great day. Bye. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
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Related Analysis

Garmin Jumps 14% on Strong Q4 Earnings and Optimistic 2025 Outlook

Garmin (NYSE:GRMN) surged more than 14% intra-day today after posting better-than-expected fourth-quarter results, with both earnings and revenue surpassing analyst estimates, alongside an upbeat forecast for 2025.

For Q4, the GPS technology leader reported adjusted earnings per share of $2.41, beating expectations of $1.91 by 26%. Revenue surged 23% year-over-year to $1.82 billion, well ahead of the $1.65 billion consensus forecast.

The company credited its record-setting year to strong performance across all five of its business segments, marking historic highs in revenue and operating income for the full year.

Looking ahead, Garmin provided a bullish outlook for 2025, forecasting full-year revenue of approximately $6.80 billion, above analysts' $6.72 billion projection. The company also expects EPS of around $7.80, reflecting continued profitability and operational strength.

Garmin saw broad-based momentum in Q4, with fitness revenue jumping 31% to $539.3 million and outdoor segment sales rising 29% to $629.4 million. The company also expanded its gross margin to 59.3% from 58.3% a year earlier, highlighting improved efficiency and pricing power.

Garmin Ltd. (GRMN) Quarterly Earnings Preview

  • Garmin Ltd. (NYSE:GRMN) is expected to report an EPS of $1.90 and revenue of approximately $1.7 billion for the upcoming quarter.
  • The company has a history of exceeding earnings expectations, with an average surprise of 28.51% over the past four quarters.
  • Garmin's financial health is solid, with a low debt-to-equity ratio of 0.0146 and a current ratio of 3.30, indicating strong liquidity.

Garmin Ltd. (NYSE:GRMN) is a well-known player in the technology sector, specializing in GPS technology and wearable devices. The company operates across various segments, including fitness, marine, aviation, auto OEM, and outdoor markets. Garmin faces competition from companies like Fitbit and TomTom, but it has carved out a strong niche with its diverse product offerings.

On February 19, 2025, Garmin is set to release its quarterly earnings before the market opens. Analysts expect the earnings per share (EPS) to be $1.90, with revenue projected at approximately $1.7 billion. This aligns closely with the Zacks Consensus Estimate, which anticipates an EPS of $1.89, marking a 9.88% increase from the previous year.

Garmin has a track record of exceeding earnings expectations, with an average surprise of 28.51% over the past four quarters. The projected revenue of $1.68 billion for the fourth quarter reflects a 13.42% year-over-year growth. This growth is likely driven by strong demand in the fitness segment, particularly for advanced wearable technology.

The company's financial metrics provide further insight into its performance. Garmin's price-to-earnings (P/E) ratio is approximately 26.92, indicating the price investors are willing to pay for each dollar of earnings. Its price-to-sales ratio stands at about 6.85, reflecting the market's valuation of its revenue.

Garmin's financial health is underscored by its low debt-to-equity ratio of 0.0146, highlighting minimal reliance on debt financing. The current ratio of 3.30 suggests strong liquidity, indicating the company's ability to cover short-term liabilities with its short-term assets. These metrics, combined with a stable EPS estimate, position Garmin favorably in the market.

Garmin Ltd. (NYSE: GRMN) Sees Significant Stock Surge Amid Strong Financial Performance

  • Garmin Ltd. (NYSE:GRMN) stock price surged by 26.03% following an impressive earnings report.
  • The company reported a 24% year-over-year increase in sales and a 41% rise in earnings.
  • Despite a high-profile share sale by Managing Director Sean Biddlecombe, Garmin maintains strong market momentum and investor confidence.

Garmin Ltd. (NYSE:GRMN) is a well-known company specializing in personal navigation devices and technology products for outdoor recreation, navigation, and fitness. The company has been experiencing a significant surge in its stock price, driven by strong financial performance and an optimistic outlook. Garmin's competitors include companies like TomTom and Fitbit, but Garmin has managed to maintain a strong market position.

On November 7, 2024, Sean Biddlecombe, Managing Director, EMEA for Garmin, sold 587 shares at approximately $210.10 each. Despite this sale, Biddlecombe still holds 6,147 shares. This transaction comes at a time when Garmin's stock is experiencing upward momentum, supported by positive revisions in earnings estimates and a strong correlation between these revisions and stock price movements.

Garmin's stock price recently surged by 26.03% in a single day, following the release of its earnings report on October 30. The stock jumped from $166.27 to $204.92, driven by a 24% year-over-year increase in sales and a 41% rise in earnings. These impressive results exceeded expectations and contributed to the stock's breakout, as highlighted by FXEmpire.

The current price of Garmin's stock is $210.63, with a slight increase of 0.46% today. The stock has fluctuated between $209.53 and $212.275, marking its highest price over the past year. Garmin's market capitalization stands at approximately $40.45 billion, with a trading volume of 404,351 shares. The company's strong financial performance and revised guidance continue to boost investor confidence.

Garmin Shares Jump 23% on Strong Q3 Earnings Beat and Raised Full-Year Guidance

Garmin (NYSE:GRMN) saw its shares rise more than 23% intra-day on Wednesday after reporting third-quarter earnings that significantly outpaced expectations and raising its full-year forecast.

The GPS technology leader posted adjusted earnings per share of $1.99, beating Street estimates by $0.55. Revenue reached $1.59 billion, surpassing the anticipated $1.44 billion and marking a robust 24% year-over-year increase.

Growth was broad-based across Garmin’s segments, with fitness revenue surging 31% and outdoor revenue up 21%. The company’s gross margin expanded to 60%, while its operating margin improved to 27.6%.

Looking forward, Garmin raised its full-year revenue outlook to $6.12 billion, above its prior guidance and surpassing the $5.988 billion consensus. The company also increased its adjusted EPS forecast to $6.85, well above Wall Street projections of $6.08.

Barclays Downgrades Garmin to Underweight, Shares Fall 2%

Garmin Ltd. (NYSE:GRMN) shares fell more than 2% pre-market today after Barclays analysts downgraded the company to Underweight from Equalweight, lowering the price target to $133 from $181.

The downgrade is based on concerns that Garmin's current valuation is overly extended. Long pointed out several factors contributing to the downgrade: first, Garmin’s premium valuation compared to its historical averages; second, limited visibility into 2025 as consumer spending on hardware remains subdued, with potential spending pull-forwards in the first half of the year likely impacting future growth; and third, a negative shift in revenue mix. The analysts anticipate lower gross margins due to a smaller contribution from Garmin’s high-margin Aviation segment in the second half of 2024, coupled with a higher proportion of lower-margin Automotive OEM revenue.

The analysts set a 22x price-to-earnings (P/E) ratio on Garmin’s 2024 estimated earnings per share of $6.05, aligning with the company’s five-year historical average, resulting in the $133 price target. This implies a potential 27% downside from the current share price, with the lower-margin Automotive segment expected to pressure Garmin’s valuation.

While maintaining this cautious outlook on Garmin, the analysts expressed optimism about Logitech (LOGI) in the consumer space, citing its conservative guidance and favorable growth potential from upcoming refresh cycles.

Garmin Cut to Neutral at JPMorgan

Analysts from JPMorgan changed their rating for Garmin (NYSE:GRMN) from Overweight to Neutral, setting a price target of $135.00. According to the analysts, the downgrade is due to anticipated limited growth potential, following an adjustment of their revenue projections. This adjustment is based on a cautious view of consumer spending after a strong holiday season, influenced by new product releases and inventory buildup.

Additionally, the earnings forecast has been significantly lowered due to the potential impact of a higher corporate tax rate in Switzerland, which might affect earnings per share by approximately 30 cents. Despite this, the December 2024 price target remains at $135, calculated at about 23 times the target multiple, aligning with Garmin's recent trading multiple and slightly below the current near-term multiple.

This valuation is supported by a Sum-of-the-Parts (SOTP) analysis, with Garmin's traditional hardware segments valued between 20 to 25 times, while the Auto OEM segment is valued lower, at around 15 times, reflecting its alignment with automotive sector peers and considering the risks related to customer concentration and financial challenges during its growth phase.