(Reuters) – Garmin Ltd on Wednesday forecast full-year revenue and profit above expectations along with strong fourth-quarter results, sending its shares up 15 percent to their highest in more than a decade.
A Garmin GPS watch is shown on a display at a store in Encinitas, California, U.S., October 30, 2017. REUTERS/Mike Blake
The company bounced back strongly in the past year after a smartphone-driven slide in demand for the car satnavs that made it famous.
The bounce has been driven mainly by growing demand for smartwatches and other wearable fitness devices that track everything from heart rates and calories to a pet’s movement.
The company, which competes with the likes of Fitbit Inc and TomTom, forecast full-year profit of about $3.70 per share and revenue of about $3.5 billion.
Analysts were expecting profit of $3.52 per share and revenue of $3.43 billion, according to IBES data from Refinitiv.
Global wearable fitness trackers market is on track to generate revenue of $48.2 billion by 2023, led by adoption of fitness tracking apps and rise in demand for wireless health monitoring devices, according to a report by research firm P&S Market Research.
In the reported quarter, three of Garmin’s five units – aviation, marine and outdoor – reported double-digit revenue growth.
The company is seeing strong demand from airline customers for its ADS-B based products, which broadcasts a plane’s position and is required by the U.S. regulators by the beginning of 2020.
“ADS-B continues to be a driver of solid performance in the aftermarket, while new platforms and favorable market conditions led the growth in the OEM category,” Chief Executive Officer Clifton Pemble said on a post-earnings conference call with analysts.
However, revenue at Garmin’s auto segment, which sells navigation devices to automakers, fell 28 percent due to lower demand for dashboard-mounted satnav devices.
Rival TomTom had in February warned of weaker-than-expected growth in automotive revenue this year.
Garmin has been relying on the growth of its watches and marine cameras to offset a decline in sales of its traditional automobile navigation devices that have been its mainstay for years.
Sales in its outdoor segment, that sells smartwatches to campers and travelers, rose about 25 percent in the quarter.
“We anticipate revenue in the outdoor segment to grow by about 10 percent in 2019, driven partly by growth in watches and inReach subscriptions,” Pemble said.
But Garmin is facing greater competition in the area from electronics heavyweights Xiaomi Corp, Apple Inc, Huawei Technologies Co Ltd and Samsung Electronics Co Ltd.
Net income rose to $190.15 million, or $1 per share, in the fourth quarter ended Dec.29. Excluding items, it earned $1.02 per share and beat the average analyst estimate of 80 cents, according to IBES data from Refinitiv.
Net sales rose about 4 percent to $932.1 million in the quarter and beat expectations of $891.3 million.
Reporting by Sayanti Chakraborty in Bengaluru; Editing by Arun Koyyur and Shailesh Kuber