Garmin Earnings: Aviation Lifts Off While Outdoor Has Uphill Battle; Shares Attractive

Garmin reported fair first-quarter results, with revenue coming in comfortably above FactSet consensus, while earnings per share were slightly below. Overall, the quarter was defined by a tale of two segments: a tough compare for the outdoor segment—and an exceptional quarter for aviation as Garmin sells into a wider array of aircraft models. However, we think the outdoor tough comparison is a good problem to have and expect continued fluctuations in the outdoor segment based on watch releases. As a reminder, we believe Garmin is a narrow-moat company based on strong switching costs seen in three of its five segments. Given that we consider aviation to be a moaty segment, we think it is especially beneficial that this segment is strengthening its customer base via new aircraft models. With guidance for the year maintained, we are reiterating our $129 fair value estimate for Garmin, leaving shares attractive for long-term investors. While we had lowered our fair value estimate for the firm last earnings as a result of moderating the impact of COVID-19-induced tailwinds in fitness, we still believe the market is not baking in enough of a lasting impact of the pandemic on health and outdoor-related habits.