A Closer Look at Garmin’s Key Metrics in Q1



Operating income by segment

Garmin (GRMN) has five business segments: Fitness, Aviation, Outdoor, Marine, and Auto. While the Fitness segment accounted for 24% of its total sales, it accounted for just 12% of its total operating income. Its Aviation business accounted for 22% of its sales and 38% of its operating income.

The Outdoor, Marine, and Auto segments accounted for 20%, 17%, and 17% of Garmin’s sales, respectively, in the first quarter of 2019. In comparison, they accounted for 28%, 17%, and 5% of the company’s operating income, respectively, in the period.

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Operating expenses

While Garmin’s total sales rose over 7% year-over-year, its research and development expenses rose less than 3%. This rise is marginal considering that Garmin needs to invest heavily in product development to compete with consumer tech giants such as Apple, Samsung (SSNLF), and China’s (FXI) Huawei and Xiaomi.

Garmin’s advertising expenses rose 12% YoY (year-over-year) as the company launched a slew of new products, while its selling, general, and administrative expenses rose 8.5% in the first quarter.

Garmin ended the first quarter with $2.7 billion in cash and marketable securities. It generated $134 million in free cash flow.

Profit margin expansion

Garmin’s operating margin is estimated to expand from 22.9% in 2019 to 23.3% in 2020 and 23% in 2021, resulting in earnings growth of 1.6% in 2019 and 5.6% in 2020. Analysts expect the company’s EPS to rise at a compound annual growth rate of 5.9% in the next five years.


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