Why Garmin Shares Plunged
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What: Shares of Garmin were looking lost today, falling as much as 12% after a dismal earnings report.
So what: The GPS-enabled gadget-maker said earnings per share fell 22% to $0.66 from $0.85 a year ago. Even more telling, revenue declined 16% to $768.5 million as demand for standalone navigation devices continued to wane, since more consumers own smartphones already equipped with equivalent GPS capabilities. Garmin's results were significantly below analysts' projections of $0.74 profit per share and revenue at $833.7 million. EPS guidance was also well below analyst expectations, as management projected 2013 earnings at $2.30 to $2.40 a share versus estimates of $2.89.
Now what: Garmin managed to gain market share in its product categories, but that just goes to go show how hard it is to grow earnings in a dying industry. The company has branched off to into watches and other more functional and sport-specific gadgets, but it's unlikely to be able to replace the sales lost from the decline of the navigation gadgets. Shareholders should also be aware that the new guidance gives the company a dividend payout ratio near 80%, putting it in danger of being cut, and the move also shows that management has no good operational use for capital. It looks Garmin may be out of ideas.
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The article Why Garmin Shares Plunged originally appeared on Fool.com.Fool contributor Jeremy Bowman and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.