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Garmin's (GRMN) Q1 Earnings & Sales Beat Estimates, Down Y/Y

Garmin Ltd. GRMN reported first-quarter 2023 pro-forma earnings of $1.02 per share, beating the Zacks Consensus Estimate by 2%. However, the bottom line declined 8% on a year-over-year basis.

Net sales were $1.15 billion, which surpassed the Zacks Consensus Estimate of $1.08 billion. The figure decreased by 2% from the year-ago quarter’s figure.

The year-over-year decline in the top line was attributed to sluggishness across the outdoor segments.

Nevertheless, GRMN witnessed strong momentum in the fitness, marine, aviation and auto segments in the first quarter.

Garmin’s strong focus on continued innovation, diversification and market expansion to explore opportunities across all business segments remains a major positive. Its strong product lines are expected to aid its performance in the near term.

Garmin Ltd. Price, Consensus and EPS Surprise

 

Garmin Ltd. Price, Consensus and EPS Surprise
Garmin Ltd. Price, Consensus and EPS Surprise

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

 

Segmental Details

Outdoor (29% of net sales): The segment generated sales of $328.7 million in the reported quarter, decreasing 27% year over year due to a slowdown in the uptake of adventure watches.

Fitness (21%): The segment generated sales of $244.7 million, which increased 11% from the year-ago quarter’s level owing to solid demand for the company’s advanced wearables.

Aviation (19%): The segment generated sales of $213.6 million, increasing 22% on a year-over-year basis. This was driven by solid momentum across the aftermarket and OEM categories.

Marine (24%): Garmin generated sales of $278.9 million from the segment, increasing 10% on a year-over-year basis. This was attributed to the favorable timing of spring promotions.

Auto (7%): The segment generated sales of $81.5 million, up 11% from the prior-year quarter’s level. The growing shipment of domain controllers contributed well.

Operating Results

In the first quarter, the gross margin was 56.9%, which expanded 40 basis points (bps) from the year-ago period’s level.

Garmin’s operating expenses of $455.8 million were up 5% from the prior-year quarter’s level. As a percentage of revenues, the figure expanded 270 bps year over year to 39.7%.

The operating margin was 17.2% in the reported quarter, which contracted 230 bps year over year.

Balance Sheet & Cash Flow

As of Apr 1, 2023, cash, cash equivalents and marketable securities were $1.55 billion, up from $1.45 billion as of Dec 31, 2022.

In the first quarter, inventories were $1.48 billion compared with $1.51 billion in the previous quarter. We note that GRMN had no long-term debt for the reported quarter.

GRMN generated $279.2 million in cash from operations in the reported quarter compared with $368.7 million in the previous quarter.

Garmin generated a free cash flow of $232.4 million.

GRMN paid out dividends worth $140 million and repurchased shares worth $41 million in the reported quarter.

2023 Guidance

GRMN reaffirmed its guidance for 2023 revenues at $5 billion. The Zacks Consensus Estimate for 2023 net sales is pegged at $5.01 billion.

Garmin expects pro-forma earnings of $5.15 per share. The consensus mark for 2023 earnings is pegged at $5.19 per share.

Zacks Rank and Other Stocks to Consider

Currently, Garmin carries a Zacks Rank #3 (Hold).

Investors interested in the broader technology sector can consider some better-ranked stocks like Agilent Technologies A, DigitalOcean DOCN and WESCO International WCC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agilent Technologies is set to report second-quarter fiscal 2023 results on May 23. The Zacks Consensus Estimate for A’s earnings is pegged at $1.27 per share, reflecting growth of 12.4% from the year-ago quarter’s reported figure. A has

DigitalOcean is scheduled to release first-quarter 2023 results on May 9. The Zacks Consensus Estimate for DOCN’s earnings is pinned at 29 cents per share, suggesting a jump from 7 cents per share reported in the prior-year quarter. DOCN has gained 25.5% in the year-to-date period.

WESCO is scheduled to report first-quarter 2023 results on May 4. The Zacks Consensus Estimate for WCC’s earnings is pegged at $3.61 per share. WCC has gained 16.7% in the year-to-date period.

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