(Reuters) - Garmin Ltd handily beat quarterly profit estimates and forecast a strong 2014 as sales of GPS-based fitness, aviation and outdoor products more than made up for shrinking sales of personal navigation devices, a market it once dominated.
Garmin shares jumped as much as 12 percent to $52.72 - their highest in six years. The stock, however, is still a far cry from the high of $124 it hit in 2007, when personal navigation devices were high in demand and featured on most year-end gifting lists.
Garmin said on Wednesday it expects revenue to grow 10-15 percent from businesses other than its personal navigation device unit, where revenue is expected to fall 10-15 percent.
The forecast implies that sales from personal navigation devices will account for less than half of the company’s revenue this year.
Sales from the personal navigation devices unit fell 12 percent to $382.5 million in the fourth quarter, while sales from all other units combined rose 14 percent to account for nearly half of the company’s total sales of $759.7 million.
Much of that was driven by strong sales in the company’s aviation and fitness businesses.
Aviation unit sales jumped 25 percent to $87.4 million in the quarter. The unit makes audio panels and collision avoidance systems for aircraft makers such as Textron Inc’s Cessna and Bombardier Inc’s LearJet.
Sales at its fitness business, which makes products such as GPS-enabled “Forerunner”-branded watches to count calories and monitor heart beats, rose 14 percent to $118.6 million.
The company said it expects higher-margin, newly-launched products such as “VIRB” outdoor action-recording camera, “vivofit” health-monitoring bands and cycling computers to generate revenue growth in 2014.
Gross margins are expected to rise to 54-55 percent from 52 percent in 2013.
“We are particularly impressed with the revenue guidance. Garmin typically guides conservatively at the beginning of the year so we think the company must be feeling very good about its business,” Wells Fargo analyst Andrew Spinola said.
Dutch rival TomTom - Europe’s largest maker of navigation devices - said last week it expects the personal navigation device market to continue to decline this year due to a slump in demand for personal sat-navs and a tepid recovery in the auto industry.
Navigation devices - once a duopoly of Garmin and TomTom - lost relevance as mapping apps became a standard feature on Apple Inc’s iPhones and phones powered by Google Inc’s Android operating system.
To counter the fall in sales, the companies charted different strategies to sustain growth. TomTom focused on mapping software, while Garmin, after a failed move to produce its own phone, invested in products for niche markets such as aviation, marine and fitness.
Garmin said on Wednesday it expects a profit of $2.50-$2.60 per share on revenue of $2.6-$2.7 billion for 2014. Analysts on average were expecting a profit of $2.56 per share on revenue of $2.58 billion, according to Thomson Reuters I/B/E/S.
Net income rose to $163.6 million, or 83 cents per share, in the fourth quarter, from $129.3 million, or 66 cents per share, a year earlier.
Excluding items, earnings were 76 cents per share, beating the average analyst estimate of 62 cents.
Total sales fell 1 percent to $759.7 million, beating average estimate of $712.8 million.
Garmin also said Chief Financial Officer Kevin Rauckman would leave the company within the next year.
Shares of the Schaffhausen, Switzerland-based company were up 9.8 percent at $51.80 Wednesday afternoon on the Nasdaq. The stock has gained about 21 percent in the past year.
As of Tuesday’s close, Garmin shares traded at a multiple of 18.6 times forward earnings, compared with TomTom’s 20.6.
Reporting by Soham Chatterjee; Editing by Saumyadeb Chakrabarty