Investors were hoping for good news from Garmin (NASDAQ:GRMN) in its fiscal second-quarter results, and they weren't disappointed. On Wednesday, the navigation device giant reported surging demand across its portfolio, which convinced management to issue a head-turning upgrade for the full-year outlook.

More on that forecast in a moment, but first, let's take a look at what went right for the business through late June.

Person checking their smartwatch with mountains in the background.

Image source: Getty Images.

Sales spike for Garmin

Sales accelerated from the prior quarter's 25% growth even as Garmin lapped some of the stronger demand rebounds of the pandemic. Revenue soared 53% year over year to $1.3 billion compared to Wall Street's expectations for a 28% increase. "Strong demand for active lifestyle products continued," CEO Cliff Pemble said in a press release, "and we experienced solid recovery within our aviation and auto segments."

Each of Garmin's five core niches turned in robust growth, in fact. Consumers snapped up fitness trackers (up 40%) and outdoor smartwatches (up 57%), along with marine (up 66%) and airplane navigation systems (up 43%). The auto division, which has been shrinking steadily for several years, is growing again, rising 74% year over year in Q2.

Margin bounce

That jump in demand powered even stronger earnings growth. Garmin raised prices while also benefiting from a tilt toward more premium products. Its aviation segment carries some of the highest margins in its portfolio, too, and so the sharp rebound there had a disproportionate impact on profitability.

GRMN Operating Margin (TTM) Chart

GRMN Operating Margin (TTM) data by YCharts.

Management had warned about flat or slightly declining margins this year, but that hasn't been the case so far. Instead, gross profit margin held steady at 59% of sales and operating margin jumped to 28% of sales from 22% a year ago. These gains allowed earnings to increase 85% year over year. Operating income roughly doubled. Pemble said, "We are very pleased with the results we have delivered thus far" in fiscal 2021.

Garmin management updates its outlook

Management backed up those comments with upgrades across its sales guidance. The fitness segment should grow by 17% in 2021 rather than the 10% executives had predicted three months ago thanks to strong demand for advanced wearable tech.

The outdoor, aviation, marine, and auto units each received similar hikes. Companywide revenue is now expected to jump to $4.9 billion compared to $4.2 billion last year. Pemble and his team had previously been guiding for revenue of $4.6 billion.

Garmin's earnings picture brightened, too, with profits set to jump to $5.50 per share rather than hold steady at $5.15 per share. The new outlook amounts to a sixth straight year of strong sales growth and rising profit margin for the tech giant. And it makes another dividend raise more likely even following this past year's 10% increase.

Put it all together, and there's a lot for investors to love about Garmin's stock. The company had a great track record heading into the pandemic, and it has only widened that performance lead over peers in the past 18 months.

Those successes should keep market-thumping returns flowing to shareholders, no matter how the broader pandemic recovery plays out over the next few quarters.

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