It's not much of a surprise that Garmin (NASDAQ:GRMN) did as well as it did this quarter. With outdoor activities still high on the list for most—especially as lockdowns continue through large portions of the US and beyond on one level or another—the ability to find your way around regardless of location is usually helpful. That made for a great quarter for the company as people keep picking up Garmin navigation gear.
Finding the Trail to Greater Earnings Figures
The numbers show a great fourth quarter for Garmin, as it turned in earnings per share figures of $1.73 that readily beat estimates of $1.29 per share. The company also turned in a win on revenue, as it brought in $1.35 billion, a 23% increase over the same time the preceding year.
The company offered several improvements in its other figures as well; the company's operating margin increased from 25.1% a year prior to 27.5% in the latest figures. Gross margin increased from 58% to 58.5%, and operating income jumped 34% against the same time the preceding year to hit $371 million.
Garmin noted that 2020 was an excellent year for the company, as demonstrated by the full-year figures as well. This is the fifth year in a row the company has posted growth in both revenue and operating income, and actually posted a record in consolidated revenue figures, turning in $4.19 billion total.
Keeping to the Marked Path
The general consensus from the analyst pool, as based on our latest research, suggests that the analysts are pretty happy with Garmin as well. The stock has held a consensus “buy” rating for the last three months, which is an upswing from the consensus of “hold” six months ago.
Six months ago, the company had one “sell” rating, four “hold” and four “buy.” The seller left the market three months ago, as the company had four “hold” and five “buy”. A new “hold” entered the picture a month ago, putting the company at five “hold” and five “buy,” which is where we sit today.
The price target has only increased in that time as well, going from $96.17 six months ago to $109.33 three months ago. A month ago, it sat at $117 even before increasing once more to today's level of $120.29. Given that the stock currently trades at $130.35, however, this represents the first time the price target has meant downside risk for the company. Given the comparative lack of movement from analysts, though—only three adjustments have been made so far this year—this could be a partial explanation.
Ongoing Development Proves a Winner
It would be easy to brush aside the issue of diversification in Garmin, as it's kind of a specialist shop. It deals exclusively in navigation gear, not all sports equipment or anything like that. However, the company's financials show that even here, there's some diversification at work. The company saw gains in its outdoor gear and its marine gear, which are two distinct market sectors of the “outdoor sports” concept. There is, after all, not much of an “indoor boating” market.
Even within these comparatively static categories, Garmin is putting out new material on a fairly regular basis. One of its latest moves, known as the Garmin Enduro, is already attracting quite a bit of attention. The Enduro starts at $799, which is a huge bill for a smartwatch, but it comes with a wide array of exciting features that should draw a lot of interest like a solar power recharge mode and a battery that can provide 70 continuous hours of GPS tracking.
The company has also stepped up features in other systems, including the launch of the Descent Mk2i, which is the first dive watch the company has released that works with a T1 tank transmitter. It's also added pregnancy options to the Garmin Connect for women eager to maintain health and fitness during pregnancy.
While Garmin's market is comparatively narrow and somewhat subject to having a decent economy—who can afford a $799 smartwatch without having a good job?—there is clearly sufficient room for diversification here that the company can keep providing value for its target market. Better yet, there isn't exactly a crowd of competitors looking to undercut Garmin's market, so it can work comparatively unmolested in the target space and serve as a complementary good with other outdoor sports operations.
As long as people are going outdoors into unfamiliar places and want to get back safely—and as long as there are satellites sufficient to provide GPS data—Garmin's product line will likely be in demand, and that makes Garmin well worth adding to your portfolio.
