Garmin Ltd. GRMN has reported second-quarter 2024 pro-forma earnings of $1.58 per share, beating the Zacks Consensus Estimate by 12.9%. The bottom line improved 9% on a year-over-year basis.
Net sales were $1.51 billion, which surpassed the Zacks Consensus Estimate of $1.44 billion. The figure increased 14% from the year-ago quarter.
Year-over-year growth in the top line was attributed to the solid momentum in the Fitness, Marine and Auto OEM segments.
Shares of Garmin have gained 37% year to date, outperforming the industry’s rally of 8.5%.
However, sluggishness in the Outdoor segment was concerning.
Garmin Ltd. Price, Consensus and EPS Surprise
Garmin Ltd. price-consensus-eps-surprise-chart | Garmin Ltd. Quote
Segmental Details
Outdoor (29.2% of Net Sales): The segment generated sales of $439.9 million in the reported quarter, decreasing 2% year over year due to weak demand for Garmin’s adventure watches.
Fitness (28.4%): The segment generated sales of $428.4 million, which increased 28% from the year-ago quarter, owing to solid demand for the company’s wearables.
Aviation (14.5%): The segment generated sales of $218.2 million, increasing 0.4% on a year-over-year basis. This was driven by the solid momentum in OEM product categories. However, weakness in the aftermarket product categories was concerning.
Marine (18.1%): Garmin generated sales of $272.95 million from the segment, increasing 26% on a year-over-year basis. This was driven by benefits from the JL Audio buyout.
Auto OEM (9.8%): The segment generated sales of $147.2 million, up 41% from the prior-year quarter. This was primarily attributed to growing shipments of domain controllers.
Operating Results
In the second quarter, the gross margin was 57.3%, which contracted 20 basis points (bps) from the year-ago period.
Garmin’s operating expenses of $520.9 million grew 9.6% from the prior-year quarter due to rising personnel costs. As a percentage of revenues, the figure contracted 130 bps year over year to 34.6%.
The operating margin was 22.7% in the reported quarter, which expanded 120 bps year over year.
Balance Sheet & Cash Flow
As of Jun 29, 2024, cash, cash equivalents and marketable securities were $2.22 billion, up from $2.19 billion as of Mar 30, 2024.
In the second quarter of 2024, Garmin generated an operating cash flow of $255 million and a free cash flow of $218 million compared with the operating cash flow of $435 million and a free cash flow of $402 million reported in the prior quarter.
The company paid out a quarterly dividend of $144 million and repurchased $10 million of shares in the reported quarter.
2024 Guidance
Garmin has raised its 2024 revenue guidance from $5.75 billion to $5.95 billion. The Zacks Consensus Estimate for 2024 net sales is pegged at $5.85 billion.
The company has also revised the pro-forma earnings per share guidance upward from $5.40 to $6.00. The consensus mark for 2024 earnings is pegged at $5.72 per share.
It expects gross and operating margins of 57% and 21.3%, respectively.
Zacks Rank & Stocks to Consider
Currently, Garmin carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Badger Meter BMI, Arista Networks ANET and Apple AAPL. Badger Meter sports a Zacks Rank #1 (Strong Buy) at present, and Arista Networks and Apple carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Badger Meter shares have gained 32.7% in the year-to-date period. The long-term earnings growth rate for BMI is projected at 17.92%.
Arista Networks shares have gained 41.5% in the year-to-date period. The long-term earnings growth rate for ANET is expected to be 16.07%.
Apple shares have gained 16.4% in the year-to-date period. The long-term earnings growth rate for AAPL is anticipated to be 12.71%.
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