Tags: Garmin | value | play | GRMN

Garmin: Value Play On Profit Rebound?

By    |   Thursday, 15 Dec 2011 10:49 PM

The once high-flying Garmin (GRMN) has posted a several year run of declining revenues and profits as competition to the company's global position system products has emerged in the form of smartphones. Investors must decide if Garmin is now a value investment, based on a profit turnaround in the 2011 third quarter.

Garmin manufactures and distributes navigation devices using global positioning system (GPS) technology. The company's business divides into the sectors of aviation, automotive, fitness, outdoor and marine, with products specifically designed for use in each of these sectors. The automotive sector generates just over half of sales. Also, just over half of revenues come from the Americas, about 40 percent from Europe, and the balance from Asia-Australia.

For the first three quarters of 2011, Garmin reported pro forma net profit of $1.71 per share, down from $1.91 a year earlier. The decline was due to a 3 percent decline in gross profit margin — to 49 percent from 52 percent — on flat revenues.

In the third quarter, the company saw pro-forma earnings increase to 71 cents per share from 70 cents a year earlier. Quarterly revenues were down 4 percent year-over-year, but gross profit increased by 2 percent to 52 percent. Gross margin was up 4 percent from the 2011 second quarter.

Shifting markets

Garmin is experiencing declines in its largest segments and regions and experiencing growth in the smaller sectors. For the first three quarters, revenues from the Americas were down 11 percent and the automotive product sector experienced a 9 percent decline.

To counter these drops, sales in Europe and Asia were up 16 and 14 percent respectively. In the product categories, fitness products produced a 29 percent gain year-to-date and aviation products were up 10 percent. It appears that shifting focus outside of the United States and on to more specialized products may be Garmin's path back to growing profitability.

Market estimates show Garmin results shrinking by another 2 percent in 2012 as the overall sector gains 19 percent. An investor picking up Garmin shares should have reasons why he or she believes the company can beat those estimates.

Recent analyst comments on the stock reflect a neutral position, with a sector perform from the RBC Capital Markets analysts and a neutral rating from the analysts at Wedbush Securities.

The company next reports on Feb. 22.

© 2017 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
Companies
The once high-flying Garmin (GRMN) has posted a several year run of declining revenues and profits as competition to the company's global position system products has emerged in the form of smartphones. Investors must decide if Garmin is now a value investment, based on a...
Garmin,value,play,GRMN
389
2011-49-15
Thursday, 15 Dec 2011 10:49 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved