Garmin Earnings Shrink, Stock Surges

Switzerland-based GPS specialist Garmin Ltd. (NASDAQ: GRMN  ) shares were soaring in early Wednesday trading, up 6.8% following release of the company's Q2 earnings results. Shares were up around 6% at the time of publication of this article.

This is despite Garmin warning of a "particularly challenging" third quarter ahead, and despite the firm's reporting numbers that seem somewhat underwhelming for Q2. Sales at the firm were down 3% in comparison to the year-ago quarter. Gross profit and operating profit margins both declined four full percentage points, pro forma earnings per share fell 22% to $0.76 per share, and the company's net was down 7% at $0.88 per share.

Nonetheless, this exceeded the number analysts had been expecting to see out of Garmin -- $0.65 per share -- which may explain the enthusiastic reception a decline in earnings is receiving. Garmin CEO Cliff Pemble noted that however bad the numbers may look on the surface, "the second quarter of 2013 was highlighted by stronger than expected revenue performance across all segments."

Longer term however, Pemble notes that Garmin continues to entertain hopes of returning to "sustained revenue and EPS growth." Analysts, on average, are forecasting earnings growth of better than 5% over the next five years.

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  • Report this Comment On July 31, 2013, at 1:55 PM, ganeshsastri wrote:

    Instead of saying pro-forma earnings, you should say IMAGINARY EARNINGS.

  • Report this Comment On July 31, 2013, at 4:19 PM, jasenj1 wrote:

    We shrank less than we expected to. How does that translate into a rise in stock price?

    OTOH, they still have a low P/E and high dividend, so they are still priced to buy if they can stave off a collapse.

    But I'd be very wary of buying into a shrinking business.

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