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Garmin Ltd. (GRMN - Free Report) has reported second-quarter 2022 pro-forma earnings of $1.44 per share, beating the Zacks Consensus Estimate by 1.4%. However, the bottom line declined 14% on a year-over-year basis.
Net sales were $1.24 billion, which lagged the Zacks Consensus Estimate of $1.36 million. The figure decreased 6% from the year-ago quarter.
The year-over-year decline in the top line was attributed to weak momentum across the fitness, marine and auto segments.
Nevertheless, the company witnessed strong 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 (30.8% of net sales): The segment generated sales of $381.9 million in the reported quarter, increasing 18% year over year. This was driven by solid demand for Garmin’s adventure watches.
Fitness (21.9%): The segment generated sales of $272.1 million, which decreased 34% from the year-ago quarter due to declining sales of cycling products and advanced wearables, reflecting the normalization of demand from the pandemic-induced hike.
Aviation (16.5%): The segment generated sales of $204.7 million, increasing 13% on a year-over-year basis. This was driven by the solid momentum across the OEM and aftermarket categories.
Marine (19.6%): Garmin generated sales of $242.8 million from the segment, decreasing 7% on a year-over-year basis. This was attributed to supply-chain constraints.
Auto (11.2%): The segment generated sales of $139.3 million, down 6% from the prior-year quarter. This was primarily due to the weak momentum across the auto OEM programs and consumer auto products.
Operating Results
In the second quarter, the gross margin was 58.7%, which contracted 10 basis points (bps) from the year-ago period.
The company’s operating expenses of $436.1 million were up 6.4% from the prior-year quarter. As a percentage of revenues, the figure expanded 420 bps year over year to 35.1%.
The operating margin was 23.6% in the reported quarter, which contracted 440 bps year over year.
Balance Sheet & Cash Flow
As of Jun 25, 2022, cash, cash equivalents and marketable securities were $1.6 billion, lower than $1.8 billion as of Mar 26, 2022.
In the second quarter, inventories were $1.4 billion compared with $1.3 billion in the previous quarter. We note that the company had no long-term debt for the reported quarter.
GRMN generated $79.8 million in cash from operations in the reported quarter compared with $185.6 million in the previous quarter.
Garmin generated a free cash flow of $4.8 million.
GRMN paid out dividends worth $129 million and repurchased shares worth $31 million in the reported quarter.
2022 Guidance
The company has revised its revenue guidance downward from $5.5 billion to $5 billion. The Zacks Consensus Estimate for 2021 net sales is pegged at $5.47 billion.
Garmin lowered its expectation for pro-forma earnings from $5.90 per share to $4.90 per share. The consensus mark for 2021 earnings is pegged at $5.90 per share.
The company anticipates gross and operating margins of 56.7% and 20%, whereas it previously stated 57.5% and 22.8%, respectively.
Image: Bigstock
Garmin (GRMN) Q2 Earnings Beat Estimates, Sales Dip Y/Y
Garmin Ltd. (GRMN - Free Report) has reported second-quarter 2022 pro-forma earnings of $1.44 per share, beating the Zacks Consensus Estimate by 1.4%. However, the bottom line declined 14% on a year-over-year basis.
Net sales were $1.24 billion, which lagged the Zacks Consensus Estimate of $1.36 million. The figure decreased 6% from the year-ago quarter.
The year-over-year decline in the top line was attributed to weak momentum across the fitness, marine and auto segments.
Nevertheless, the company witnessed strong 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 (30.8% of net sales): The segment generated sales of $381.9 million in the reported quarter, increasing 18% year over year. This was driven by solid demand for Garmin’s adventure watches.
Fitness (21.9%): The segment generated sales of $272.1 million, which decreased 34% from the year-ago quarter due to declining sales of cycling products and advanced wearables, reflecting the normalization of demand from the pandemic-induced hike.
Aviation (16.5%): The segment generated sales of $204.7 million, increasing 13% on a year-over-year basis. This was driven by the solid momentum across the OEM and aftermarket categories.
Marine (19.6%): Garmin generated sales of $242.8 million from the segment, decreasing 7% on a year-over-year basis. This was attributed to supply-chain constraints.
Auto (11.2%): The segment generated sales of $139.3 million, down 6% from the prior-year quarter. This was primarily due to the weak momentum across the auto OEM programs and consumer auto products.
Operating Results
In the second quarter, the gross margin was 58.7%, which contracted 10 basis points (bps) from the year-ago period.
The company’s operating expenses of $436.1 million were up 6.4% from the prior-year quarter. As a percentage of revenues, the figure expanded 420 bps year over year to 35.1%.
The operating margin was 23.6% in the reported quarter, which contracted 440 bps year over year.
Balance Sheet & Cash Flow
As of Jun 25, 2022, cash, cash equivalents and marketable securities were $1.6 billion, lower than $1.8 billion as of Mar 26, 2022.
In the second quarter, inventories were $1.4 billion compared with $1.3 billion in the previous quarter. We note that the company had no long-term debt for the reported quarter.
GRMN generated $79.8 million in cash from operations in the reported quarter compared with $185.6 million in the previous quarter.
Garmin generated a free cash flow of $4.8 million.
GRMN paid out dividends worth $129 million and repurchased shares worth $31 million in the reported quarter.
2022 Guidance
The company has revised its revenue guidance downward from $5.5 billion to $5 billion. The Zacks Consensus Estimate for 2021 net sales is pegged at $5.47 billion.
Garmin lowered its expectation for pro-forma earnings from $5.90 per share to $4.90 per share. The consensus mark for 2021 earnings is pegged at $5.90 per share.
The company anticipates gross and operating margins of 56.7% and 20%, whereas it previously stated 57.5% and 22.8%, respectively.
Zacks Rank and Stocks to Consider
Currently, Garmin carries a Zacks Rank #3 (Hold).
Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Aspen Technology (AZPN - Free Report) , Keysight Technologies (KEYS - Free Report) and Asure Software (ASUR - 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.
Aspen technology has returned 18.9% in the year-to-date period. The long-term earnings growth rate for AZPN is currently projected at 16.3%.
Keysight Technologies has lost 26.8% in the year-to-date period. KEYS’ long-term earnings growth rate is currently projected at 9.1%.
Asure Software has lost 27.2% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.