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Shares of Garmin (NASDAQ: GRMN) jumped on Wednesday after the GPS and wearables company reported solid fourth-quarter results. Garmin handily beat analyst estimates for both revenue and earnings, driven by strong growth in non-auto products. Garmin stock was up as much as 10.5% Wednesday morning, settling to a 7.7% gain by 11:30 a.m. EST.
Garmin reported fourth-quarter revenue of $861 million, up 10% year over year and $64 million higher than the average analyst estimate. Sales of automotive products slumped 17% to $227 million, but every other segment posted double-digit growth: outdoor revenue by 46% to $175 million, fitness revenue by 20% to $274 million, marine revenue by 19% to $67 million, and aviation revenue by 13% to $117 million.
Image source: Garmin.
Non-GAAP earnings per share came in at $0.73, down from $0.74 in the prior-year period but $0.16 better than analysts were expecting. Rising costs, particularly a 21.6% jump in research and development spending, an increase in interest expense, and a higher tax rate kept a lid on the bottom line.
CEO Cliff Pemble provided an optimistic outlook by saying:
Garmin expects to produce $3.02 billion of revenue in 2017, flat compared to 2016 due to continued decreases in the automotive segment. Non-GAAP EPS of $2.65 is expected, down from $2.83 in 2016. Garmin has made progress in diversifying into areas like fitness wearables in recent years, but a declining market for navigation devices is still holding the company back.
Investors shrugged off the poor guidance from Garmin, instead focusing on the fourth-quarter beat. With non-auto products representing a growing portion of Garmin's business, the market is giving the company the benefit of the doubt.
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