A month has gone by since the last earnings report for Garmin (GRMN). Shares have added about 6.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Garmin due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Garmin's Q3 Earnings & Sales Beat Estimates, Rise Y/Y

Garmin reported third-quarter 2024 pro forma earnings of $1.99 per share, beating the Zacks Consensus Estimate by 36.3%. The bottom line improved 41% on a year-over-year basis.

Net sales were $1.58 billion, which surpassed the Zacks Consensus Estimate of $1.44 billion. The figure increased 24.1% from the year-ago quarter.

Year-over-year growth in the top line was attributed to the solid momentum across Outdoor, Fitness, Aviation, Marine and Auto OEM segments.

Segmental Details

Outdoor (33.2% of Net Sales): The segment generated sales of $526.6 million in the reported quarter, up 21% year over year, driven by growth in Garmin’s adventure watches.

Fitness (29.2%): The segment generated sales of $463.8 million, which increased 31% from the year-ago quarter, owing to solid demand for the company’s wearables.

Aviation (12.9%): The segment generated sales of $204.6 million, up 3% on a year-over-year basis. This was driven by the solid momentum in the aftermarket product categories.

Marine (14%): Garmin generated sales of $222.2 million from the segment, up 22% on a year-over-year basis. This was driven by benefits from the JL Audio buyout.

Auto OEM (10.6%): The segment generated sales of $168.7 million, up 53% from the prior-year quarter. This was attributed to growing shipments of domain controllers.

Operating Results

In the third quarter, the gross margin was 60%, which expanded 300 basis points (bps) from the year-ago period.

Garmin’s operating expenses of $514 million grew 12% from the prior-year quarter due to rising personnel costs in research and development and sales and marketing. As a percentage of revenues, the figure contracted 350 bps year over year to 34.6%.

The operating margin was 27.6% in the reported quarter, which expanded 640 bps year over year.

Balance Sheet & Cash Flow

As of Sept. 28, 2024, cash, cash equivalents and marketable securities were $2.42 billion, up from $2.22 billion as of June 29, 2024.

In the third quarter of 2024, Garmin generated an operating cash flow of $258 million and a free cash flow of $219 million compared with the operating cash flow of $255 million and a free cash flow of $218 million reported in the prior quarter.

The company paid out a quarterly dividend of $144 million and repurchased $20 million of shares in the reported quarter.

2024 Guidance

Garmin has raised its 2024 revenue guidance from $6.12 billion to $5.75 billion. The Zacks Consensus Estimate for 2024 net sales is pegged at $6 billion.

The company has also revised the pro forma earnings per share guidance upward from $6 to $6.85. The consensus mark for 2024 earnings is pegged at $6.09 per share.

It expects gross margin, operating margin and tax rate to be 58.5%, 24% and 16.5%, respectively.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 16.22% due to these changes.

VGM Scores

At this time, Garmin has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Garmin has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Garmin belongs to the Zacks Electronics - Miscellaneous Products industry. Another stock from the same industry, Carrier Global (CARR), has gained 5.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.

Carrier Global reported revenues of $5.98 billion in the last reported quarter, representing a year-over-year change of +4.4%. EPS of $0.83 for the same period compares with $0.89 a year ago.

For the current quarter, Carrier Global is expected to post earnings of $0.50 per share, indicating a change of -5.7% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

Carrier Global has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.

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