Garmin Ltd.GRMN reported better-than-expected results in the fourth quarter of 2017 with revenues and earnings surpassing the Zacks Consensus Estimate.
Earnings of 79 cents per share outpaced the consensus mark by 4 cents. Also, the bottom line was up 6% sequentially and 9% year over year.
The results were driven by solid performance in fitness, marine, outdoor and aviation segments. Auto revenues declined year over year.
During the quarter, the company plans to approve cash dividend of $2.12 per share, which will be payable in four equal installments on dates to be determined by the board.
Management focuses on continued innovation, diversification and market expansion to explore growth opportunities in all business segments. However, macroeconomic challenges remain part of the operating environment. We observe that shares of Garmin have gained 28.6% in the past 12 months, outperforming the industry 's 21.2% rally.
Garmin's fourth-quarter revenues of $888 million beat the Zacks Consensus Estimate by $15 million and were up 19.6% sequentially and 3.2% from the prior-year quarter. The year-over-year increase was backed by higher demand across fitness outdoor, marine and aviation segments.
Garmin's Outdoor, Fitness, Marine, Auto/Mobile and Aviation segments generated 23%, 31%, 9%, 22% and 15% of quarterly revenues, respectively. Seasonality results in considerable variations in Garmin's quarterly revenues.
Outdoor revenues were up 9.9% sequentially and 15.9% year over year, driven mainly by robust demand for wearables and growth of inReach subscription services.
The Fitness segment increased 65.2% sequentially and 0.8% from the year-ago quarter. The year-over-year increase was driven by GPS enabled products, partially offset by declines in basic activity trackers.
The Marine segment increased 8.3% sequentially and 24.1% year over year. The year-over-year improvement was driven by strength in chartplotter and fish finder products. Also, Navionics acquisition added to growth.
The Auto/Mobile segment was up 3.4% sequentially but down 13.7% on a year-over-year basis. The year-over-year decrease was mainly due to shrinking of the personal navigation device (PND) market, partially offset by OEM growth and strength in niche categories such as fleet, camera, truck and RV.
Aviation segment revenues were up 4.1% sequentially and 10.7% from the prior-year quarter. The increase was mainly driven by higher sales of aftermarket products and positive contributions from OEM products.
Revenues by Geography
While America generated 48% (up 25% sequentially but down 4.3% year over year) of total revenues, EMEA and APAC contributed 38% (up 16.7% sequentially and 12.6% year over year) and 14% (up 10.3% sequentially and 7.7% year over year), respectively.
Gross margin was 56.2%, up 150 basis points (bps) from the year-ago quarter. Stronger demand drove volumes across all segments except Auto, pulling down segment gross margins on a year-over-year basis.
Operating expenses of $320.1 million were up 3% from $311 million in the year-ago quarter. Operating margin of 56.2% was up 160 bps year over year owing to an increase in operating income.
GAAP net income was $149.8 million or 79 cents per share compared with $137.9 million or 73 cents per share a year ago.
Inventories were up 10% sequentially to $517.6 million. Cash and marketable securities were approximately $1.05 billion compared with $1.14 billion in the previous quarter. The company has no long-term debt.
As of Dec 30, the company generated cash flow of $198.3 million from operating activities and free cash flow of $143.8 million.
For full-year 2018, management expects revenues of $3.2 billion and pro-forma earnings of $3.05 per share. The Zacks Consensus Estimate for revenues and earnings for 2018 is pegged at $3.13 billion and $2.97 per share, respectively.
Garmin Ltd. Price, Consensus and EPS Surprise
Zacks Rank and Other Stocks to Consider
Garmin carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the technology sector are PetMed Express PETS , Teradyne TER and Mercadolibre MELI . While PetMed and Teradyne sport a Zacks Rank #1 (Strong Buy), Mercadolibre carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Long-term earnings per share growth rate for PetMed, Teradyne and Mercadolibre is projected to be 10%, 12% and 25%, respectively.
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