Garmin (GRMN -8.36%) this morning reported document first-quarter income that jumped 11% 12 months over 12 months. Backside-line income grew even sooner at 13%. The maker of GPS-enabled units even boosted income steering for the 12 months.
So traders may be questioning why the inventory plunged by as a lot as 12.6% Wednesday morning. Whereas it recovered a few of that drop, Garmin shares had been nonetheless down by 9% as of three:15 p.m. ET.
Garmin journey watch with flashlight. Picture supply: Garmin.
Constructive enterprise tendencies, however tariffs loom
Garmin had a powerful quarter by most accounts. Income beat consensus estimates and the brand new steering exceeds present analyst expectations for full-year income. Administration famous “a continuation of the optimistic enterprise tendencies” it has been experiencing over the long run. However it did not elevate web earnings steering attributable to an anticipated slide in revenue margin. That is attributable to a present assumption of $100 million of elevated prices attributable to tariff impacts.
Whereas the tariff state of affairs is fluid, Garmin administration is taking a conservative strategy for traders. Its assumptions are based mostly on “tariff buildings which are more than likely to affect Garmin,” CEO Cliff Pemble mentioned on the earnings name.
About 25% of Garmin’s gross sales within the U.S. are generated from merchandise manufactured exterior the nation, principally at its Taiwan amenities. Whereas it’s at present benefiting from short-term tariff exemptions, steering shouldn’t be based mostly on these exemptions remaining. That might result in potential upside ought to present exemptions be made everlasting.
In the present day’s drop has the inventory down nearly 15% within the final month. It additionally means shares are buying and selling at a price-to-earnings (P/E) ratio of about 23.5 based mostly on 2025 earnings estimates. That is beneath the common of the previous 12 months of about 26.
As talked about, Garmin’s enterprise stays robust. It achieved double-digit year-over-year gross sales development in three of its 5 segments. That is after a really robust 2024 when income soared by 20% total.
The corporate has no debt and a powerful money place that represents about 11% of its market cap. It simply lined its dividend fee with free money stream within the first quarter. In the present day’s drop appears like a very good alternative for buy-and-hold traders.
