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Garmin's Fusion Extends IBBI Deal, Boosts Marine Business

Zacks Equity Research

Garmin Ltd. GRMN has been making quite a few significant investments in the Marine business, which helped it to develop a solid product line.

Apart from continuously expanding product lines in the business, Garmin’s brand, Fusion recently expanded deal with Independent Boat Builders Inc. (IBBI). The deal entitles Fusion to continue as IBBI’s exclusive marine electronics supplier for the next five years.

IBBI, the industry's largest purchasing cooperative, consists of a 19-member network of leading boat brands. It collectively builds nearly 25% of all boats sold in the United States.

The latest deal gives IBBI members a direct access to Fusion's full line of audio entertainment products, including chartplotters and touchscreen multifunction displays, sonar technology, high-definition radar, autopilots, high-resolution mapping and other products and services, through 2024.

The deal should increase Garmin’s sales, in turn expanding top-line growth.

We observe that the company has gained 33.1% in the past year, outperforming 5.9% growth of the industry it belongs to.

Let's take a look at the performance of Garmin's Marine business and how it is poised for the future.

Marine Segment in Focus

Garmin's marine portfolio includes chartplotters, touchscreen multifunction displays, sonar technology and high-resolution mapping.

Though the segment has been the lowest contributor to total revenues over the past five years, its performance has been stable. Gross margin from this segment have been above 45% over this period.

In first-quarter 2019, revenues from the Marine segment increased 41.5% sequentially and 18% year over year. The growth was driven by strength in new products, namely chartplotters and sonar products.

Garmin's strategy has been to build a strong position for itself through product introductions and strategic partnerships. Aside from individual and recreational purchases (retail sales), Garmin also signed on some important accounts (OEMs).

Garmin Ltd. Price and Consensus


Garmin Ltd. Price and Consensus

Garmin Ltd. price-consensus-chart | Garmin Ltd. Quote

Acquisitions Supplement Expansion Efforts

Garmin has supplemented marine product expansion efforts with acquisitions that have made significant contributions.

Last February, the company acquired Trigentic AB, a provider of solutions and services in areas of embedded systems, power supply and power distribution for the marine and recreational vehicle or RV market.

In 2017, the acquisition of Navionics SpA, a privately-held worldwide provider of electronic navigational charts and mobile applications for the marine industry, contributed meaningfully to Garmin's marine segment.

To Conclude

Management focuses on continued innovation, diversification and market expansion to explore growth opportunities in all its business segments. Product line expansion remains the top priority for Garmin.

A superior portfolio of new products across segments, secular drivers in the aviation market, market share gains in the marine market and contribution from acquisitions are other positives.

It goes without saying that the company is on the right track with regard to product offerings and expansion plans. However, macroeconomic challenges remain part of the operating environment.

Zacks Rank

Currently, Garmin carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Autohome Inc. ATHM, Match Group, Inc. MTCH and Marchex, Inc. MCHX, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Autohome, Match Group and Marchex is currently projected at 20.9%, 15.2% and 15%, respectively.

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