Investors were expecting good things from GPS device specialist Garmin's (NASDAQ:GRMN) latest earnings report. After all, the company's prior quarter extended its multi-year streak of rising profitability and also marked a new sales record.

While the company's growth slowed compared to the prior quarter, shareholders still saw plenty of support for the company's broader goals of achieving record sales and earnings in fiscal 2018.

Let's take a closer look at the results.

A jogger interacts with her smartwatch.

Image source: Getty Images.

Slow and steady growth

As I mentioned, Garmin's growth didn't quite match the prior quarter's 11% sales jump. Yet this quarter's gains were strong and still edged past management's expectations. Healthy demand for its smartwatches, fitness trackers, and marine and aviation navigators offset declines in the automotive business to push overall sales higher by 4%. "We achieved strong second quarter consolidated revenue growth led by robust double-digit growth in our fitness, marine and aviation segments," CEO Cliff Pemble said in a press release.

That wide portfolio helped Garmin grow even as its more focused peers struggled. Rival Fitbit, by comparison, endured a 15% revenue drop even though its new smartwatch outsold Garmin's competing products. 

Rising profitability

Garmin's profitability has been improving for two consecutive years, and the company is on track to extend that impressive trend into 2018 as gross margin inched up to 58.5% of sales from 58.2% in the prior-year quarter. Over the broader six-month period, that figure has risen by a full percentage point, up to 59.2% of sales. Fitbit's comparable metric is sitting at 42.6% of sales so far this year. 

FIT Gross Profit Margin (TTM) Chart

Data by YCharts.

Garmin needs a continuous string of innovative product releases to keep positive momentum on this score. In the second quarter, these included upgraded mobile payment technologies in its Fenix smartwatch franchise and a new range of cycling products. Its latest smartwatch also received improvements to its sensing technologies and can now detect blood oxygen levels. 

The updated 2018 outlook

CEO Cliff Pemble and his executive team left their 2018 sales and profit targets unchanged back in May, choosing instead to take a conservative tack despite the strong start they had just logged for the year. But with six months of operating data in the rearview mirror, the broader picture is clearer, and so investors got an update to Garmin's financial targets with this report.

Here's where those forecasts stand right now. Garmin is looking for its automotive division to shrink by 17%. Its fitness segment should rise, meanwhile, as demand shifts away from low-priced fitness trackers and toward feature-rich smartphones. That move should also lift its outdoor division that, along with the aviation and marine segments, is predicted to expand by double digits this year.

Overall, Garmin's targets call for revenue to rise by about 5% to $3.3 billion, up from its prior target of $3.2 billion. Gross profit margin is still expected to inch up to about 59% of sales, but thanks to a higher operating margin and a lower tax rate, earnings are now targeted to jump to $3.30 per share compared to the $3.05 per share executives had predicted back in May. With retailers stocking up on its latest devices ahead of the holiday shopping season, management likes their chances for faster growth this year. "The results we achieved thus far in 2018," Pemble said, "give us confidence to raise our full year guidance."

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Fitbit. The Motley Fool has a disclosure policy.