Navteq Finds Direction in the GPS Market

| About: NAVTEQ Corp. (NVT)

On Thursday, map data provider Navteq (NVT) reported 4Q and fiscal 2006 results. (Full release)

4Q 2006 Highlights

  • Revenue up 24% from 4Q 2005 to $180.7 million (this is a record for the company)
  • Operating costs and expenses $117.89 million
  • Revenue from the Europe, Middle East & Africa [EMEA] region up 34% YOY to $113.6 million
  • Americas region revenue was up 17% to $66.3 million
  • Asia Pacific revenue $800K
  • 4Q car sales up 3% overall (SUVs up 9%, minivans and pickups down 9%, luxury cars down 11%, small and mid-sized cars up 8%)
  • Operating income up 51% over 4Q 2005 to $62.8 million (also a record)
  • Net income of $42.94 million from $27.67 million in 4Q 2005
  • EPS up 54% to $0.45 from $0.29 in 4Q 2005
  • Diluted share count 95,852,000
  • Cash position totaled $322.5 million
  • Made two acquisitions in the quarter ( and The Map Network)
  • Six new models began offering in-dash navigation systems in the quarter
  • Fiscal 2006 Highlights

  • Revenue up 17% to $581.6 million from fiscal 2005
  • EMEA revenue was $360.1 million, an increase of 14% over 2005
  • Americas region revenue up 25% to $216.2 million
  • Asia Pacific revenue $5.4 million
  • Total costs and expenses $427.923 million
  • Operating income up 14% to $153.7 million
  • Unit sales nearly tripled in North America, due to retailers upping the amount of devices offered
  • Net income $110 million ($1.15 per share), down from fiscal 2005 when you include the tax benefit added to earnings (adding up to $0.85 per share) in fiscal 2005
  • Diluted share count 95,713,000
  • Cash flow from operating activities $140.008 million, up from the prior year's $137.753 million
  • Cash flow from investing activities -$134.813 million
  • Cash flow from financing activities $26.256 million
  • Ended year with coverage in 59 countries and territories, adding six in 2006
  • Fiscal 2007 Guidance

  • Expecting revenue of $720 million to $750 million
  • Expecting EPS of $1.20 and $1.26
  • Expecting worldwide tax rate of 29%
  • Per-share numbers based on diluted share count of approximately 100 million
  • Expects fixed asset capital expenditures of approximately $60 million
  • These results beat analysts earnings estimates of $0.43 per share and also beat sales estimates of $174.74 million. This is the second quarter in a row in which Navteq has beat earnings estimates, they beat 3Q 2006 estimates by 12%. It marks another strong quarter for Navteq, one that I am very happy with.

    The balance sheet is currently the strongest its ever been, and in fiscal 2006 the business produced a good amount of cash flow. In-dash car system sales were slow for the quarter and overall for the year it was a tough market, but Navteq has continually pulled through over the past few quarters and reported excellent results. I believe the two acquisitions they made during the quarter will be a good use of cash for the long-term strength of the business. Europe seems to be expanding very nicely and providing steady growth for Navteq. I'm pleased with how management is focused on improving sales and trying to get more efficient with the business. I'm glad they're in charge, as I always have been.

    I feel Navteq is in a great position for the long-term with the GPS market. I think GPS systems will increase with popularity over the long run, and I love Navteq's position because all GPS's need data, and Navteq is by far the leading provider of map data. Navteq released a couple new products in the 4Q that are very innovative (one is for the 10 largest cities in America and provides restaurant reviews and other in-depth info for the cities), I like what the company is doing with its cash. Retailers are increasing the amount of GPS devices they have to offer, which signifies that the GPS market is indeed growing. Most of the popular retailers are offering more GPS devices, and I think that trend will continue over the next few years.

    Navteq has an increasing amount of cash and no debt, so I won't be surprised to see some more acquisitions throughout fiscal 2007, and some new product offerings as well. I hope they can effectively use cash to help in-dash GPS sales, it's something that seems to be keeping the company down to earth, so to speak. In-dash systems are a pretty new market, so it'll definitely take a good amount of time and money to get things to the point where more people will want a car with the systems in them. I think the in-dash GPS market is similar to what air conditioning in cars was 30 years ago. I expect that in 15 years we'll see a good portion of cars with in-dash systems, though I don't think it'll be quite as high-end of a product.

    For the 1Q 2007, analysts are on average expecting an EPS of $0.19 on sales of $148.77 million.

    Disclosure: Author is long NVT.

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    Tagged: Earnings
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