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Garmin Ltd. Navigates Toward New Growth Opportunities

By Joe Tenebruso - Feb 19, 2016 at 8:23AM

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The GPS device maker is diversifying its product lines as it struggles with a downturn in its core personal navigation device business.

Garmin's new fitness devices are helping to offset a decline in auto-related sales. Image source: Garmin.

Garmin (GRMN 1.26%) reported fourth-quarter results on Feb. 17. The navigation technology company is weathering a secular decline in its automotive-focused products by expanding into adjacent markets.

Garmin results: The raw numbers


Q4 2015

Q4 2014

Growth (YOY)


$781.36 million

$803.31 million


Net Income

$132.38 million

$210.25 million


Earnings Per Share




Data source: Garmin Q4 2015 earnings press release.

What happened with Garmin this quarter?

  • Total revenue fell 3% to $781 million, as an 11% collective increase in sales for Garmin's outdoor, fitness, aviation, and marine segments nearly offset a 21% drop in auto segment sales.
  • Gross and operating margins were 52.9% and 18.7%, respectively, down from 53.6% and 21.9% in the fourth quarter of 2014.
  • Net income -- adjusted to exclude the effects of foreign currency movements and income tax benefits -- declined 5.6% to $140.4 million. And adjusted earnings per share, aided somewhat by stock buybacks, decreased 3.9% to $0.74.

Operating segment results
Garmin's fitness segment posted year-over-year revenue growth of 14%, thanks to strong sales in the company's wellness, running, and cycling product lines. Gross margin declined to 51% from 61% in Q4 2014, primarily due to increased holiday promotions and a less favorable product mix.

Outdoor segment revenue rose 6%, driven by sales of wearables, while gross margins were down slightly at 60%.

Aviation segment sales jumped 12% in the fourth quarter, and gross margin increased to 76%, up from 70% in the year-ago quarter.

New product offerings helped boost marine segment revenue by 8%, with gross margin also improving to 54%, up from 47% in the prior-year period.

Garmin's largest segment, however, continues to deteriorate. Auto-related sales plunged 21% in the fourth quarter, as consumers continue to migrate toward free smartphone-based navigation options.

Looking forward
Management anticipates full-year 2016 revenue to remain steady at $2.82 billion, with sales growth in Garmin's non-auto segments expected to offset ongoing declines in the personal navigation device market.

Gross margin is forecast to decrease slightly to 54.5%, down from 54.6% in the prior year. Operating margins are predicted to decline to approximately 18%, down from 19.5% in 2015, due primarily to ongoing research and development investment and costs related to Garmin's recently announced acquisitions.

All told, 2016 pro forma earnings per share are projected to be approximately $2.25. That would represent a decline of about 10% from 2015.

"Despite the challenging global economic environment and the intensified competitive landscape of 2015, we finished strong with revenue and margins exceeding our expectations," said CEO Cliff Pemble in a press release. "We are utilizing our robust balance sheet to further diversify our revenue base in adjacent categories with our recently announced acquisitions. We believe we have strong products across all of our business segments and are well positioned as we enter 2016."

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