Garmin Ltd. (GRMN) Posts Solid Results, But PND Decline Still An Issue


Garmin Ltd. (NASDAQ:GRMN) released its latest earnings report last night, posting pro forma earnings per share of 76 cents. That was ahead of consensus estimates of 62 cents, although the company did see a higher than expected tax rate, which was a headwind of around 5 cents a share during the quarter.

GAAP earnings were 83 cents per share, including a $17 million benefit from foreign exchange rates. The company’s revenue fell 1.2% to $760 million, which was still ahead of consensus at $715 million. Garmin Ltd. (NASDAQ:GRMN) said its operating margin was 22.7%, a 320 basis point increase year over year, although a 90 basis point sequential decrease. Free cash flow for the fourth quarter was $135 million or around 69 cents per share.

Breaking down Garmin’s results

Digging deeper into Garmin Ltd. (NASDAQ:GRMN)’s results, there are other bright points as well. Revenues from the company’s Automotive / Mobile division fell 12% year over year, compared to the 20% D.A. Davidson & Co. analyst JB Groh had been estimating. In the previous quarter, revenues from the division declined 16% year over year.

The company noted that higher OEM and mobile product sales partially offset lower PND sales. Garmin Ltd. (NASDAQ:GRMN) also captured 45% of the global market share for PND and 81% of the U.S. market. The company’s Auto / Mobile segment now makes up 49% of its total revenues and 33% of its total operating income. That’s compared to 55% and 36%, respectively, in the previous year.

Adjusting estimates for Garmin

The analyst has adjusted his estimates for Garmin Ltd. (NASDAQ:GRMN) this year in light of the guidance provided by the company. Management now expects pro forma earnings per share for the 2014 fiscal year to be between $2.50 and $2.60 per share and revenue to be between $2.6 billion and $2.7 billion. They expect operating margins to remain strong at around 21% and the tax rate to be 17%, which was a bit higher than Wall Street was expecting.

After reviewing this guidance, Groh has increased his fiscal year 2014 earnings per share estimate from $2.40 to $2.50 per share and his fiscal year 2015 estimate from $2.35 to $2.45 per share. He has maintained his Neutral rating on Garmin Ltd. (NASDAQ:GRMN), although he raised his price target from $48 to $52 per share.

The analyst sees the company’s latest report as “solid,” although he said continued secular declines in its biggest segment according to revenue will keep him on the sideline at the company’s current price levels. Although Garmin is performing well in its other four segments, he sees a long way before it will be able to fill in the gap caused by declines in PND.

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About the Author

Michelle Jones
Michelle Jones was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Michelle has been with ValueWalk since 2012 and is now our editor-in-chief. Email her at

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