Garmin (NASDAQ:GRMN) investors were looking for the company to provide some evidence that the business' declines were moderating. But Q3 offered mostly more of the same story that has driven the stock more than 30% lower during the last 12 months. However, judging by the market's muted response, investors weren't expecting Garmin to perform any better than it did.

Garmin smartwatch. Image source: Garmin.

Garmin results: The raw numbers


Q3 2015 Actuals

Q3 2014 Actuals

Growth (YOY)


$680 million

$706 million


Operating Income

$125 million

$176 million


Pro Forma EPS




Key highlights from the quarter

  • Currency changes negatively affected the quarter by about $52 million, or 7%. Excluding the impacts of currencies, the company would have reported a year-over-year increase in revenue.
  • Garmin's gross profit margin continued to narrow, falling from 56.4% in the year-ago quarter to 53.3% during Q3.
  • While management cited "a geographic revenue mix shifting toward countries with weaker currencies" as part of the reason for the pressure on its gross profit margin, the company also acknowledged lower average selling price as a cause. This continues to highlight the increasing competition in some of Garmin's key markets.
  • With a clear nod to the challenge of competing with Apple's new smartwatch, the company's advertising spend increased 11% from the year-ago quarter "to support wearables growth."

Management acknowledges the bad, hopes for the best
"The global economic environment and intensified competitive landscape have challenged our ability to repeat the strong financial performance of 2014," said Garmin president and CEO Cliff Pemble. With the launch of Apple Watch this year, 2015 was indeed a different ballgame for the company's wearables segment -- and it has weighed heavily on results, playing a key role in the company's pricing pressure and need for greater advertising for its wearable products.

But Pemble remains optimistic about the coming year:

However, we have a solid plan to improve our results over the long term. Our plan includes compelling new products, some of which have already launched in the fourth quarter with many more to come in 2016. We look forward to once again meeting the expectations of our investors and ourselves while creating long-term sustainable value.

Looking ahead
Investors should take Garmin's expectations with a grain of salt. While many of the markets the company operates in do have large and growing addressable markets, competition in connected devices is increasing rapidly.

Further, one of the attractive aspects of Garmin stock for some investors may be the company's dividend. With a dividend yield of 5.8%, it's certainly notable. But if Garmin continues on its current path, the dividend may be cut in the future.