With a big Q2 beat on the books, Garmin (NASDAQ:GRMN) now expects 2014 revenue of $2.75B-$2.85B and EPS of $2.95-$3.05, above prior guidance of $2.6B-$2.7B and $2.50-$2.60; consensus is at $2.71B and $2.77.
The company also says it will repatriate cash by moving "certain US subsidiaries out from under our Taiwanese subsidiary." Garmin will make $300M in related tax payments over the next year, and declares the action will allow it to "fund dividends, share repurchases, and acquisitions."
Auto/mobile sales (45% of revenue) +2% Y/Y in Q2 to $350M. Fitness +79% Y/Y to $150.7M thanks to vivofit fitness band demand and new biking/running product launches. Outdoor -1% to $106.1M, aviation +11% to $97.3M, marine +1% to $73.8M.
Gross margin was 57%, even with Q1 and up from 55% a year ago; a 65% fitness GM provided a boost. GAAP opex +6% Y/Y to $225.7M. $129M was spent on buybacks.
Ahead of the repatriation, Garmin ended Q2 with $2.8B in cash/investments, and no debt.
Pac Crest's Brad Erickson has cut Garmin (GRMN -5.9%) to Underperform, He notes an expected fall iWatch launch serves as a competitive threat, and thinks shares are worth "something in the mid-$40s," assuming a valuation of 10x-12x forward enterprise value/EPS.
Garmin's fitness sales rose 38% Y/Y in Q1, and made up 17% of revenue. Strong demand for the company's Forerunner GPS watches and Vivofit fitness bands fueled the growth.
While Apple reportedly preps an iWatch, various Android OEMs have either entered the smartwatch market, or plan to do so. Microsoft is also expected to join the fray.
After skyrocketing during its first 4 trading days, GoPro (GPRO -9.8%) is selling off hard today. Shares still +54% from an opening trade of $28.65.
Nonetheless, Ambarella (AMBA +3.1%) is adding to its recent GoPro/Dropcam-fueled gains following a Dougherty report stating the company is set to replace CSR (CSRE +4.2%) as the video processor supplier for Garmin's (GRMN +0.9%) Virb action camera (competes against GoPro).
Garmin admitted on its Q1 CC (transcript) early Virb sales haven't met expectations, and that "the existence of entrenched competitors in this market is a factor." The company is counting on a product refresh and higher promotional spend to change its fortunes.
While Garmin's (GRMN +4.7%) automotive/mobile sales (42% of revenue, long pressured by smartphones) fell 4% Y/Y in Q1 to $243M, fitness sales soared 38% to $100.3M, aviation sales rose 19% to $96M, outdoor sales rose 10% to $84M, and marine sales rose 19% to $60M.
Moreover, auto/mobile's decline was smaller than Q4's 12% drop, thanks to growing OEM sales (auto design wins) and the amortization of deferred revenue. Fitness growth accelerated from Q4's 14% clip due to strong demand for Forerunner GPS watches and Vivofit fitness bands.
Gross margin rose 500 bps Y/Y to 57% - a mix shift towards fitness (64% GM) and aviation (74%) helped out - and opex growth of 7% trailed revenue growth of 10%. $33M was spent on buybacks. Cash/investments stand at $2.8B.
As is its custom, Garmin will wait until Q2 is over to update its full-year guidance. Shares temporarily made new 52-week highs today before pulling back.
Garmin's (GRMN +3.2%) can become a top-2 player in the activity monitor market with the help of its recently-launched Vivofit fitness band, thinks Citi's Jeremy David, upgrading shares to Buy.
David notes Amazon reviews for Vivofit are positive (current rating of 4/5 stars), says Citi's retail checks are "promising," and argues the device's strong battery life and reasonable pricing help its cause. He also believes market leader Fitbit's recall of its Force bracelet create an opening.
In addition Fitbit, Vivofit faces competition from Nike, Jawbone, and (indirectly) smartwatch vendors. In-depth reviews of Vivofit have been mixed; Gizmodo calls the device "decently comfortable with an understated appearance," but doesn't like the lack of a display backlight.
Garmin (GRMN) expects 2014 revenue of $2.6B-$2.7B and EPS of $2.50-$2.60. While the latter is only in-line with a $2.56 consensus, the former is above a $2.58B consensus.
Garmin also announces: 1) It's hiking its quarterly dividend by $0.02 to $0.48/share. Garmin now sports a 3.6% yield. 2) Kevin Rauckman, the company's CFO/treasurer since its 2000 IPO, will be leaving within the next year. Garmin will search for a replacement.
Q4 results trounced estimates with the help of a 25% Y/Y increase in aviation product sales, up from 15% in Q3. Automotive/mobile sales, which still accounted for nearly half of 2013 sales, fell 12% in seasonally strong Q4 vs. 16% in Q3. Outdoor sales +7% vs. -4% in Q3, fitness +14% vs. +25%, marine +13% vs. +24%.
Gross margin rose 300 bps Y/Y in Q4 to 52%. Garmin projects a 2014 GM of 54%-55%, up from a 2013 level of 53%. Op. margin is expected to slip to 21% from 2013's 22% due to R&D investments.
While total opex fell 1% Y/Y in Q4 due to a 28% drop in ad spend to $34.9M, R&D spend rose 11% to $92.6M. $31M was spent on buybacks.
Garmin Ltd., designs, develops, manufactures and markets a diverse line of user-friendly handheld portable and fixed-mount products for the auto/mobile, outdoor, fitness, marine and general aviation markets.