Garmin Earnings: What to Watch

Garmin (NASDAQ: GRMN) stock has tracked right along with the market so far in 2020, first swooning as the S&P 500 dove in late March and then rallying right back to positive territory in early July. Investors appear to believe the GPS device giant's growth will be dependent on the economic health of key markets like the U.S., Europe, and China in the quarters to come.

But Garmin has a chance to set a more positive tone for its sales and earnings outlook when it announces fiscal second-quarter results before the market opens on Wednesday, July 29. Let's look at some key metrics to watch for in that report, including management's updated guidance for the rest of 2020.

A hiker checks her smartwatch.

Image source: Getty Images.

Bracing for a tough quarter

The hesitation on the part of investors so far this year can be tied to expectations for a brutal second-quarter sales result. While revenue jumped 12% in the prior quarter and extended the tech company's winning streak into early 2020, that announcement only included the selling period that ended on March 31. That means all the most intense impacts of retailer closings and social distancing will be captured in this upcoming report.

Garmin warned back in late April of a significant sales decline this quarter, and most investors who follow the stock are predicting revenue will dive 29% to $659 million. The consumer-focused parts of its business, which span smartwatches and fitness trackers, could be the hardest hit as retailers temporarily closed their doors through most of April and May.

Staying profitable

Garmin in late April withdrew its 2020 financial outlook that had called for a fourth straight year of improving earnings and strong operating margin. However, CEO Cliff Pemble and his team said at the time they believed the company would earn a modest profit during the worst of the COVID-19 pandemic's business impact.

Look for operating margin to fall significantly from the 21% rate the company notched in Q1. Garmin likely generated some unusual expenses related to supply chain disruptions. The more important metrics to watch going forward describe its inventory pressure heading into the key holiday shopping season. There's some seasonality to its business, which means Garmin might have had to cut prices on a few of its products or even write off some inventory.

The holiday lineup

The good news is Garmin's outlook is almost sure to predict a rebound from the sales slump that the business suffered in Q2. All the major economies around the world have reopened to some extent in recent weeks, and the tech company is likely delivering for customers across growing segments like smartwatches, aviation and boating.

The recessionary economic environment could complicate management's hopes for a quick return to overall sales gains, and so investors will be listening for comments about the latest demand trends in late Q2 and early Q3. Garmin's strong start to the year implied it would notch another year of near double-digit sales gains and improving operating margin.

COVID-19 likely scrapped those two targets, but we'll get a key update on Wednesday that indicates whether investors can expect a return to form for the business in 2021.

10 stocks we like better than Garmin
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Garmin wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks


*Stock Advisor returns as of June 2, 2020


Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More