Shares of Garmin (NASDAQ:GRMN) trounced the market in 2019 as investors cheered the consumer electronics specialist's robust sales and profit growth. Yet much of that gain is built on the idea that Garmin would perform just as well over the peak holiday shopping season.

That enthusiasm also means the bar is set high for the upcoming earnings report that covers this important selling period. Let's look at what investors might see from Garmin when it announces its results on Wednesday, Feb. 19.

A hiker consults her smartwatch.

Image source: Getty Images.

No signs of stress

Garmin's growth in recent quarters has been impressive almost across the board. Sure, its automotive GPS division is shrinking, just as it has for several years. But the company is posting robust gains in its fitness, outdoor, and aviation segments thanks to a packed portfolio of popular products. Overall, sales jumped 15% last quarter despite a 17% decrease in the auto GPS segment.

The fourth quarter involves bigger competitive challenges than the seasonally weak third quarter, especially in the crowded fitness tracker and smartwatch spaces. We'll find out if Garmin met those challenges by judging its sales pace on Wednesday.

Management has projected that revenue will land at about $3.65 billion for the full year, or about $150 million above its initial 2019 outlook. The company will need to report $1 billion in Q4 revenue to meet that ambitious target, and that's what most investors are expecting to see on Wednesday.

Navigating to higher margins

Garmin has found a way in recent years to pair market-beating growth with rising profit margin, which has become a key element of the investment thesis. Operating margin has improved to 25% of sales from 23% through the first nine months of 2019, and a continued uptick in the fourth quarter will be an unmistakably positive sign of Garmin's pricing power and the wisdom of its strategic shift into high-margin areas like aircraft GPS platforms.

A weaker profitability result, on the other hand, might mean Garmin has lost some of its competitive strength amid price cuts and new launches by rivals like Fitbit (NYSE: FIT). But investors aren't predicting such a decline in this report.

Looking ahead to 2020

Assuming Garmin hits its financial targets, the tech company will have just closed its fourth consecutive year of market-beating sales growth and record profitability. That's a formula for significant earnings growth, and in fact profits should reach $4.15 per share in 2019 compared with $2.94 just two years ago.

Investors might expect the outlook that CEO Cliff Pemble and his team issue for 2020 to reflect that gathering momentum. Sure, the consumer electronics space is competitive and is subject to quick, disruptive demand shifts. But Garmin has endured these swings, including in the fitness tracker and automotive segments in recent years, while still notching record sales and earnings.

As a result, management's forecast for 2020 will likely include more growth on both the top and bottom lines.