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Why Shares of Garmin Ltd. Were Heading North

By Jeremy Bowman – Feb 19, 2014 at 2:31PM

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Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Garmin Ltd. (GRMN 3.54%) were navigating higher today, climbing as much as 12% on a strong fourth-quarter earnings report.

So what: The maker of GPS devices and other gadgets posted a profit of $0.76 a share, ahead of expectations of $0.62. Revenues dipped slightly, falling 1.1% to $759.7 million, but that was much better than expectations of $712.8 million. Despite the secular decline in personal navigation devices, Garmin has found stability in its outdoor, fitness, aviation, and marine segment, sales of which grew 14% in the quarter.  That shift has enabled gross margins to expand, lifting profit from $0.68 a year ago to $0.76.

Now what: Garmin shares hit a 52-week high on the news, and the company plans to up its already strong dividend by 6.7%. Further instilling investor confidence was the company's outlook, which projects revenue of $2.6 billion to $2.7 billion, and EPS of $2.50-$2.60 for 2014. Analysts had been eyeing sales of $2.58 billion on EPS of $2.56. While Garmin's strong growth days are clearly past it, the company seems to have found its niche in specialized navigation devices and, with its near-4% dividend yield and share buybacks, the stock looks like a solid value play for the foreseeable future. 

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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