Earnings Show Another ‘Working Smart’ Win for Garmin Ltd.

GRMN stock - Earnings Show Another ‘Working Smart’ Win for Garmin Ltd.

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Garmin Ltd. (NASDAQ:GRMN) should be losing its uphill battle. Apple Inc. (NASDAQ:AAPL) is still the sexy name in consumer-technology devices that do everything (including the GPS work that made Garmin famous), while Fitbit Inc (NYSE:FIT) is the scrappy up-and-comer that was willing to create a new product category. And yet, GRMN stock is not losing.

In fact, GRMN stock is edging higher — again — in step with more quarterly revenue and earnings growth. What gives?

In short, while the company has dabbled in smartwatches and smart speakers, it never stopped making sure it was the king of the GPS market that got the company to where it is today. Garmin stock owners are the beneficiary of the company’s ability to remain (mostly) focused, with shares gaining 3.4% in the wake of Wednesday’s report.

Garmin Earnings

Add another victory to Garmin’s tally. For the quarter ending in March, Garmin turned $710.9 million worth of revenue into a per-share profit of 68 cents. Both were better than the top line of $668.8 million and bottom line of 56 cents per share of GRMN stock analysts expected. And, net sales were up 11% year-over-year, while earnings per share grew 31%.

Operating profit margins expanded from 18.2% to 20.0%.

CEO Cliff Pemble commented on the quarterly numbers:

“We achieved record first quarter revenue with double digit consolidated growth led by strong growth in our outdoor, fitness, aviation and marine segments. Both the outdoor and fitness segments delivered solid, double digit revenue growth, and we remain confident in our wearable product offerings. We are pleased with our first quarter results and look forward to launching new, compelling products throughout the remainder of the year.”

As Pemble noted, forward progress was seen almost across the board. Its outdoor and fitness categories, both of which are heavily represented by wrist-worn devices, saw revenue growth of 24% and 20% respectively. Meanwhile, sales of aviation and marine GPS devices were up 19% and 9%, respectively, year-over-year.

The only weak spot was Garmin’s automotive segment — once its bread and butter business — which saw sales fall 12%. Even so, the company continues to innovate on that front.

Working Smart

When Garmin was a young startup, it took bold risks. Though it wasn’t the first organization to develop global positioning system tools, it was the first to mainstream consumer versions of this technology.

Things have changed in the meantime. Technology has shrunk and become more powerful. Today’s smartphones that fit in your hand are more powerful than the computer you owned 20 years ago, and better connected to the internet. There’s little doubt that smartphones and the wearable evolution are the future.

Garmin, however, has never abandoned its roots or gone all-in on penetrating markets it could never dominate.

That’s not to say it hasn’t dabbled strategically when specific opportunities have surfaced. Case in point: On Tuesday, the company announced it would be working with the University of Kansas Medical Center to identify the most effective means of using wearables to detect and manage medical conditions like sleep apnea and atrial fibrillation.

It’s not exactly cutting edge stuff anymore, as other companies are doing parallel development work. That, however, is the point. Garmin isn’t taking aim, firing and then hoping there’s a target in place. The University of Kansas project, the new tactix(r) Charlie wrist-worn GPS and the upcoming dezl(tm) 780 GPS platform — designed specifically for the trucking industry — are just new melds of existing technologies for established markets.

It may not be sexy innovation, but the massive pullbacks names like GoPro Inc (NASDAQ:GPRO) and Fitbit have dished out to shareholders serve as a not-so-gentle reminder of what can happen when there’s no meaningful market for innovative products.

Looking Ahead for GRMN Stock

This strategy is largely why Garmin has remained a growth machine in an environment where it arguably shouldn’t have been. The company has kept its focus on being the best GPS solutions provider it could be, and didn’t aimlessly innovate.

It’s a formula Garmin expects to continue working at least through the end of this year too. The company offered full-year guidance of $3.2 billion in revenue and earnings of $3.05 per share of GRMN stock. Both are up from 2017’s comparisons of $3.09 billion and $2.94 per share.

It’s not red-hot growth by any means, but let’s not forget that the tortoise ended up beating the hare.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.

Article printed from InvestorPlace Media, https://investorplace.com/2018/05/garmin-grmn-stock-earnings/.

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