Garmin operating profit rises 34 per cent as margins widen
Garmin increased third-quarter sales and lifted operating profit much faster, helped by a more favorable product mix, lower product costs and a tariff refund. Fitness and outdoor products recorded revenue growth, while the automotive equipment business contracted. The company raised its annual revenue and pro forma earnings outlook after reporting stronger gross and operating margins.
Economics & Markets··Evening
Margins outpace sales growth
Garmin, a producer of navigation equipment and fitness and outdoor devices, increased third-quarter sales by 12 per cent to 1.986 billion dollars from 1.771 billion dollars a year earlier. The quarter ended on September 26. Operating profit rose 34 per cent to 611.6 million dollars. The company’s operating margin reached 30.8 per cent, compared with 25.8 per cent in the previous year. Garmin released the results on October 28 and raised its full-year outlook. Gross margin increased to 63.3 per cent from 59.1 per cent. The company attributed that improvement to favorable product mix, lower product costs and a 33 million dollar tariff refund.[1], [2]
Outdoor and fitness businesses expand
Fitness revenue increased 16 per cent to 694.3 million dollars, with operating profit of about 231 million dollars. Outdoor revenue rose 20 per cent to 597.3 million dollars and generated approximately 233 million dollars of operating profit. Aviation sales grew 5 per cent to 252.7 million dollars, generating about 66 million dollars of operating profit. Marine revenue increased 16 per cent to 309.9 million dollars, with operating profit of roughly 94 million dollars. Automotive equipment supplied to vehicle manufacturers moved in the other direction: revenue declined 20 per cent to 131.9 million dollars and the segment posted an operating loss of about 12 million dollars.[1]
Annual outlook rises after stronger earnings
Diluted earnings per share under generally accepted accounting principles rose to 2.80 dollars from 2.08 dollars. Pro forma earnings per share increased 39 per cent to 2.76 dollars. Operating expenses grew 10 per cent to about 646 million dollars; research and development spending increased 9 per cent. The effective tax rate declined to 18.1 per cent from 21.2 per cent. Garmin generated around 394 million dollars of operating cash and 293 million dollars of free cash flow. Management now expects annual revenue of approximately 8.15 billion dollars and pro forma earnings per share of 10.80 dollars. It assumes a 61 per cent gross margin and a 29 per cent operating margin.[1]
