Please ensure Javascript is enabled for purposes of website accessibility

Garmin Earnings: Trends to Watch

By Demitri Kalogeropoulos - Feb 14, 2021 at 9:55AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The GPS device giant reports its holiday results in just a few days.

Garmin (GRMN 3.24%) investors have a lot to look forward to in the next week. The GPS device giant in late October projected a nearly total rebound from COVID-19 challenges that pressured the business in early 2020. Thanks to a strong holiday quarter in key product categories like smartwatches and fitness trackers, Garmin is looking to end the year on a high note.

The company will detail that seasonal performance on Feb. 17 while issuing its first outlook for the 2021 year. Let's take a peek at key metrics to watch on Wednesday.

A hiker checks her GPS watch.

Image source: Getty Images.

Smartwatches and fitness devices

One of the most attractive parts of Garmin's business is its diverse product range that spans consumer electronics and professional equipment like boat and airplane navigation. That posture allowed the company to post strong growth through the pandemic despite slumping demand in areas like auto and aircraft GPS devices. Sales jumped 19% in the three months that ran through late September.

CEO Cliff Pemble and his team projected a strong finish to the year, too, which should put overall sales growth at about 7% in 2020. Look for popular releases in the fitness tracker and smartwatch divisions to offset declines in a few of Garmin's other niches.

Cost challenges

The aviation segment is highly profitable, and so pandemic-related declines in that category will hurt profitability this quarter, as they have through most of the year. Garmin is expecting operating margin to fall to about 24% for 2020 to mark the first drop in several years.

GRMN Operating Margin (TTM) Chart

GRMN operating margin (TTM) data by YCharts. TTM = trailing 12 months.

On the bright side, pricing likely held up across most of its portfolio thanks to a flood of new releases. The fitness segment saw a 75% income surge in the third quarter. These wins imply that Garmin will notch another record income result for the holiday season and for the wider fiscal year.

Looking ahead

Assuming Garmin at least hits its latest financial targets, sales will have risen 7% last year as double-digit growth in the marine, fitness, and outdoor segments offset nearly 20% drops in aviation and automotive. Gross profit margin would enter 2021 at 59% while operating margin is at 24% of sales.

The outlook is bright for improvements in each of these metrics as long as Garmin maintained -- or added to -- the market share momentum it enjoyed through most of the past year. In fact, investors who follow the stock are predicting that sales growth will speed up to over 8% in 2021. Garmin's detailed financial forecast should include similarly strong projections on earnings and profitability.

Stepping back, Garmin could easily see another margin boost in 2021 that would mark its fourth year out of the past five that paired surprisingly strong sales growth with increased operating margin. The year 2020 represented a break from that market-thumping streak. But the setback looks like it was modest, leaving this dividend stock primed for more growth that should continue to reward investors.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Garmin Ltd. Stock Quote
Garmin Ltd.
$104.55 (3.24%) $3.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.