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Garmin Reports Third Quarter Revenue and Profit Growth; Raises Guidance

Published: Nov 1, 2017 7:00 a.m. ET

SCHAFFHAUSEN, Switzerland, Nov 01, 2017 (BUSINESS WIRE) -- Garmin Ltd. GRMN, +4.93% today announced results for the third quarter ended September 30, 2017.

Highlights for the third quarter 2017 include:

Total revenue of $743 million, growing 3% over the prior year, with outdoor, aviation, marine and fitness collectively growing 9% over the prior year quarter and contributing 75% of total revenue
Gross margin improved to 58.4% compared to 56.2% in the prior year quarter
Operating margin improved to 22.8% compared to 22.1% in the prior year quarter
Operating income was $170 million, growing 6% over the prior year quarter
GAAP EPS was $0.78, an 18% improvement over the prior year quarter, and pro forma EPS [(1)] was $0.75, consistent with the prior year quarter
Completed the acquisition of Navionics® S.p.A., a privately-held worldwide provider of electronic navigational charts and mobile applications for the marine industry
Launched several new wearables within the fitness segment, including the vívoactive® 3, vívomove® HR, vívosport® and vívofit® jr. 2 featuring Disney, Star Wars and Marvel branded bands and mobile app adventures...

Another strong report from Garmin. I'm going to have to update my revenue chart on a later post, but segment growth this quarter was:
Outdoor 31%; Aviation 16%; Marine 10%; Fitness -12%; Auto -12%

Importantly, deceleration slowed in both Fitness and Auto from last quarter. See previous post for discussion of that.
The spending in R&D that I've mentioned I like to see is paying off. Brand new products in Outdoor for diving and 'bat swing sensor' product for baseball. New wearables in Fitness, and what really excites me is the Garmin Speak featuring Amazon Alexa in Auto. I saw that product on their website for the first time this week when I was looking for earnings date. They need to advertise this. It looks awesome and exactly what I want with my Alexa for music in the car, but with more for map/directions. I can easily see this helping the Auto segment stabilize more.

FCF for the Q at $153M easily covers the $96M for the dividend and the $11M for buybacks. Cash up to $2.4B. R&D expenses up 11%, which as I said, doesn't bother me one bit. Actually the opposite. Margins also up, along with full year guidance. Guidance for 2017 revs has moved from $3.02B to $3.04B to now $3.07B this year. And earnings from the initial $2.65 to $2.90 now. Love the under promise and gradual increases as things go well. With these financial metrics, a dividend raise for next year would not surprise me. Or maybe a special dividend instead? Just guessing there, but there continues to be lots to like here.

Long GRMN. See profile for holdings

Check out the Garmin Speak on their site.
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