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Garmin Earnings: What to Watch

Garmin (NASDAQ: GRMN) has given investors plenty to celebrate over the past year. The GPS device maker struggled with plunging demand in the first phase of the pandemic, but sales surged in the following months -- enough to keep revenue rising for a fifth straight year.

Can the company make it six for six?

That's a key question heading into Garmin's fiscal first-quarter report, set for the morning of Wednesday, April 28. Let's take a look at what investors can expect from that announcement.

Portfolio checkup

Garmin's diverse portfolio is one of its best assets, since weak results in one area can be offset by better demand elsewhere. That was the scenario last year, when surging volumes in the fitness and marine categories made up for falling sales in aviation and auto navigation. Overall sales rose 11%, close to double the 6% that executives initially projected.

Image source: Getty Images.

Most investors who follow the stock are looking for another big sales result this week. Revenue should rise by about 10% to $938 million in the period that ends in late March. That's on top of the 12% increase the company reported a year ago thanks to strong momentum in the marine and smartwatch niches. Garmin will likely have some additional standout products to highlight on Wednesday.

Cost challenges

The profit outlook isn't as bright. Investors are looking for profits to dip to $0.89 per share this quarter, compared to $0.91 per share a year ago. CEO Cliff Pemble and his team said back in February that profitability will be hurt in 2021 by extra spending in areas like research and development. Operating profit margin might edge lower for a second straight year after steadily rising in each of the previous four.

GRMN Operating Margin (TTM) data by YCharts

Still, the company should report gross profit margin of nearly 60% thanks to a flood of innovative product releases in the smartwatch, fitness, and marine spaces. Look for executives to describe a strong demand environment that allowed for higher prices. Yet success on that score might be tempered by shipping challenges or other temporary setbacks.

Looking ahead

Heading into this report, Garmin is predicting that sales will rise for a sixth straight year to land at about $4.6 billion. For a welcome change, each of its five core product divisions should contribute to growth, with the marine segment leading the way and the automotive niche barely rising. Earnings per share should be around $5.15, executives said in February.

Because so much of the selling year still lies ahead, Garmin isn't likely to make dramatic changes to these forecasts. Potential threats to its outlook include additional virus outbreaks, shipping disruptions, and a growth hangover from the end of federal stimulus support. The company is facing a difficult comparison with 2020 and its double-digit sales boost.

Another double-digit increase is possible this year, and Wednesday's report should bolster that optimistic investment narrative. Looking ahead, Garmin is positioned well for $5 billion in annual sales in 2020 and well over $1 billion in annual earnings.

Just five years earlier those metrics stood at $3.1 billion of sales and $670 million of profits. That steady growth is rare in the consumer tech world and is a sign of a diverse and well-run business.

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


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