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Garmin (GRMN) Q1 Earnings Lag Estimates, Sales Rise Y/Y
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Garmin Ltd. (GRMN - Free Report) has reported first-quarter 2022 pro-forma earnings of $1.11 per share, missing the Zacks Consensus Estimate by 3.5%. Further, the bottom line declined 6% on a year-over-year basis.
Net sales were $1.17 billion, which surpassed the Zacks Consensus Estimate of $1.14 million. The figure increased 39% from the year-ago quarter.
Top-line growth was driven by the strong performance delivered by Garmin’s marine, auto and outdoor segments.
However, the company witnessed sluggishness in the fitness segment in the reported quarter.
Notably, 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 (32.8% of net sales): The segment generated sales of $384.6 million in the reported quarter, increasing 50% year over year. This was driven by solid demand for Garmin’s adventure watches.
Fitness (18.8%): The segment generated sales of $220.9 million, which decreased 28% from the year-ago quarter due to declining sales of cycling products, reflecting the normalization of demand from the pandemic-induced demand hike.
Aviation (14.9%): The segment generated sales of $174.8 million, increasing 1% on a year-over-year basis. This was driven by solid momentum across the OEM category.
Marine (21.7%): Garmin generated sales of $254.1 million from the segment, increasing 21% 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 (11.8%): The segment generated sales of $138.3 million, up 11% from the prior-year quarter. This was primarily driven by strengthening momentum across auto OEM programs and consumer auto products.
Operating Results
In the first quarter, the gross margin was 56.5%, which contracted 330 basis points (bps) from the year-ago period.
The company’s operating expenses of $433.9 million were up 10.7% from the prior-year quarter. As a percentage of revenues, the figure expanded 50 bps year over year to 37%.
The operating margin of 19.5% in the reported quarter contracted 380 bps year over year.
Balance Sheet & Cash Flow
As of Mar 26, 2022, cash, cash equivalents and marketable securities were $1.8 billion, higher than $1.5 billion as of Dec 25, 2021.
In the first quarter, inventories were $1.3 billion compared with $1.2 billion in the previous quarter. We note that the company had no long-term debt for the reported quarter.
It generated $185.6 million in cash from operations in the reported quarter compared with $168.9 million in the previous quarter.
Garmin generated a free cash flow of $125.9 million.
GRMN paid out dividends worth $129 million in the reported quarter.
2022 Guidance
The company projects revenues of $5.5 billion. The Zacks Consensus Estimate for 2021 net sales is pegged at $4.96 billion.
Garmin expects pro-forma earnings of $5.90 per share for 2022. The consensus mark for 2021 earnings is pegged at $5.68 per share.
The company anticipates gross and operating margins to be 57.5% and 22.8%.
Image: Bigstock
Garmin (GRMN) Q1 Earnings Lag Estimates, Sales Rise Y/Y
Garmin Ltd. (GRMN - Free Report) has reported first-quarter 2022 pro-forma earnings of $1.11 per share, missing the Zacks Consensus Estimate by 3.5%. Further, the bottom line declined 6% on a year-over-year basis.
Net sales were $1.17 billion, which surpassed the Zacks Consensus Estimate of $1.14 million. The figure increased 39% from the year-ago quarter.
Top-line growth was driven by the strong performance delivered by Garmin’s marine, auto and outdoor segments.
However, the company witnessed sluggishness in the fitness segment in the reported quarter.
Notably, 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 (32.8% of net sales): The segment generated sales of $384.6 million in the reported quarter, increasing 50% year over year. This was driven by solid demand for Garmin’s adventure watches.
Fitness (18.8%): The segment generated sales of $220.9 million, which decreased 28% from the year-ago quarter due to declining sales of cycling products, reflecting the normalization of demand from the pandemic-induced demand hike.
Aviation (14.9%): The segment generated sales of $174.8 million, increasing 1% on a year-over-year basis. This was driven by solid momentum across the OEM category.
Marine (21.7%): Garmin generated sales of $254.1 million from the segment, increasing 21% 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 (11.8%): The segment generated sales of $138.3 million, up 11% from the prior-year quarter. This was primarily driven by strengthening momentum across auto OEM programs and consumer auto products.
Operating Results
In the first quarter, the gross margin was 56.5%, which contracted 330 basis points (bps) from the year-ago period.
The company’s operating expenses of $433.9 million were up 10.7% from the prior-year quarter. As a percentage of revenues, the figure expanded 50 bps year over year to 37%.
The operating margin of 19.5% in the reported quarter contracted 380 bps year over year.
Balance Sheet & Cash Flow
As of Mar 26, 2022, cash, cash equivalents and marketable securities were $1.8 billion, higher than $1.5 billion as of Dec 25, 2021.
In the first quarter, inventories were $1.3 billion compared with $1.2 billion in the previous quarter. We note that the company had no long-term debt for the reported quarter.
It generated $185.6 million in cash from operations in the reported quarter compared with $168.9 million in the previous quarter.
Garmin generated a free cash flow of $125.9 million.
GRMN paid out dividends worth $129 million in the reported quarter.
2022 Guidance
The company projects revenues of $5.5 billion. The Zacks Consensus Estimate for 2021 net sales is pegged at $4.96 billion.
Garmin expects pro-forma earnings of $5.90 per share for 2022. The consensus mark for 2021 earnings is pegged at $5.68 per share.
The company anticipates gross and operating margins to be 57.5% and 22.8%.
Zacks Rank and Stocks to Consider
Currently, Garmin carries a Zacks Rank #4 (Sell).
Investors interested in the broader technology sector can consider better-ranked stocks like Jabil (JBL - Free Report) , Jack Henry & Associates (JKHY - Free Report) and Broadcom (AVGO - Free Report) . While Jabil currently sports a Zacks Rank #1 (Strong Buy), Broadcom and Jack Henry & Associates carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Jabil has gained 4.3% over a year. The long-term earnings growth rate for JBL is currently projected at 12%.
Jack Henry & Associates has gained 18.4% over a year. The long-term earnings growth rate for JKHY is currently projected at 17%.
Broadcom has gained 22% over a year. The long-term earnings growth rate for AVGO is currently projected at 14.5%.