Garmin’s evolution is paying off. Although navigation devices for drivers shrunk 5 percent during 2011, on Feb. 22 the company beat expectations as it announced $910 million in sales in the fourth quarter, up 9 percent from a year earlier. Garmin’s quarterly profit increased 25 percent during the quarter, too, and it proposed paying out dividends of $1.80 per share over four quarters. Investors cheered the news, pushing the stock up 9.3 percent to close at $48.86.
Chief Operating Officer Clifton Pemble told analysts on Garmin’s earnings call that the company sees more growth in these new lines of business. In the fitness products, for example, people often get the idea of using GPS in their hobbies by trying out apps on their smartphones and later buying a dedicated device as they continue to get more serious about the pursuit. Chief Financial Officer Kevin S. Rauckman said the company is also “investing pretty heavily” in getting carmakers to use Garmin products in their built-in navigation systems. By selling directly to carmakers, Garmin wants to regain a piece of the navigation trend it helped build.
Many analysts, including Goldman Sachs (GS) and JPMorgan Chase (JPM), responded to the earnings news by raising their target prices for Garmin. Some on Wall Street now see the stock trading as high as $60. For shareholders, that’s a step in the right direction.
Weise is a reporter for Bloomberg Businessweek.
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