Garmin Falls Short of Earnings Estimates

Technology

Published: October 28, 2015 10:15 am

Garmin Ltd. (NASDAQ: GRMN) reported its third-quarter financial results before the markets opened on Wednesday. The company had $0.51 in earnings per share (EPS) on $680 million in revenue, which compares to consensus estimates from Thomson Reuters of $0.55 in EPS on revenue of $687.58 million. The same period from the previous year had $0.76 in EPS on $706.28 million in revenue.

Gross and operating margins were 53% and 18.5%, respectively. Gross margin was affected by geographic revenue mix shifting toward countries with weaker currencies relative to the U.S. dollar and lower average selling prices. Operating margin was further affected by strategic investments in R&D and advertising.

The company returned cash to shareholders with its quarterly dividend of approximately $97 million and its share repurchase activity, which totaled $51 million in the third quarter. Garmin had $192 million remaining in the share repurchase program authorized through December 31, 2016.

In terms of the guidance, Garmin expects full-year EPS to be roughly $2.25 and revenue to be $2.8 billion. The consensus estimates call for $2.37 in EPS on $2.82 billion in revenue.

In terms of its segments the company reported:

Auto had $264.6 million in revenue, down 14% year over year.
Fitness had $143.2 million in revenue, up 23%.
Outdoor had $115.3 million in revenue, down 5%.
Aviation had $94.2 million in revenue, down 5%.
Marine had $62.3 million in revenue, compared to $62.1 million last year.

Cliff Pemble, president and CEO of Garmin, commented on earnings:

The global economic environment and intensified competitive landscape have challenged our ability to repeat the strong financial performance of 2014. However, we have a solid plan to improve our results over the long term. Our plan includes compelling new products, some of which have already launched in the fourth quarter with many more to come in 2016. We look forward to once again meeting the expectations of our investors and ourselves while creating long-term sustainable value.

Shares of Garmin were up fractionally Wednesday morning to $35.05. The consensus analyst price target is $40.08, and the 52-week trading range is $31.32 to $60.19.

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