Garmin's (GRMN) Q4 Earnings & Sales Beat Estimates, Down Y/Y
Garmin Ltd. GRMN reported fourth-quarter 2022 pro-forma earnings of $1.35 per share, beating the Zacks Consensus Estimate by 18.4%. However, the bottom line declined 13% on a year-over-year basis.
Net sales were $1.31 billion, which surpassed the Zacks Consensus Estimate of $1.29 billion. The figure decreased by 6% from the year-ago quarter’s figure.
The year-over-year decline in the top line was attributed to sluggishness across the fitness and auto segments.
Nevertheless, GRMN witnessed strong momentum in the aviation segment in the fourth 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-eps-surprise-chart | Garmin Ltd. Quote
Segmental Details
Outdoor (29.7% of net sales): The segment generated sales of $388.3 million in the reported quarter, increasing 3% year over year. This was driven by solid demand for Garmin’s handhelds and services.
Fitness (25.8%): The segment generated sales of $336.5 million, which decreased 28% from the year-ago quarter’s level due to sluggishness across all categories.
Aviation (17.2%): The segment generated sales of $225.2 million, increasing 27% on a year-over-year basis. This was driven by solid momentum across the aftermarket and OEM categories.
Marine (16.1%): Garmin generated sales of $210.6 million from the segment, increasing 7% on a year-over-year basis. This was attributed to the strong demand for the company’s sonar and chartplotters.
Auto (11.2%): The segment generated sales of $145.7 million, down 14% from the prior-year quarter’s level. This was primarily due to weak consumer auto product sales.
Operating Results
In the fourth quarter, the gross margin was 57%, which expanded 150 basis points (bps) from the year-ago period’s level.
Garmin’s operating expenses of $477.8 million were up 4.6% from the prior-year quarter’s level. As a percentage of revenues, the figure expanded 380 bps year over year to 36.6%.
The operating margin was 20.5% in the reported quarter, which contracted 210 bps year over year.
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash, cash equivalents and marketable securities were $1.45 billion, lower than $1.46 billion as of Sep 24, 2022.
In the fourth quarter, inventories were $1.515 billion compared with $1.533 billion in the previous quarter. We note that GRMN had no long-term debt for the reported quarter.
GRMN generated $368.7 million in cash from operations in the reported quarter compared with $154.1 million in the previous quarter.
Garmin generated a free cash flow of $309.3 million.
GRMN paid out dividends worth $280 million and repurchased shares worth $93 million in the reported quarter.
2023 Guidance
GRMN projects 2023 revenues at $5 billion, which reflects a growth of 3% from 2022. The Zacks Consensus Estimate for 2022 net sales is pegged at $5.05 billion.
Garmin expects pro-forma earnings of $5.15 per share. The consensus mark for 2022 earnings is pegged at $5.25 per share.
Management anticipates gross and operating margins of 57.5% and 20.3%, respectively.
Zacks Rank and Other Stocks to Consider
Currently, Garmin carries a Zacks Rank #2 (Buy).
A few more top-ranked stocks in the broader Zacks Computer & Technology sector are Arista Networks ANET, Agilent Technologies A and Baidu BIDU. While Arista Networks sports a Zacks Rank #1 (Strong Buy), Agilent Technologies and Baidu carry a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks has gained 6.1% in the past year. The long-term earnings growth rate for ANET is currently projected at 17.5%.
Agilent has gained 8.4% in the past year. A’s long-term earnings growth rate is currently projected at 10%.
Baidu has lost 7.1% in the past year. The long-term earnings growth rate for BIDU is currently projected at 19.4%.
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