Will Garmin (GRMN) Surprise This Earnings Season? - Analyst Blog

By Zacks Equity Research,

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Garmin Ltd. ( GRMN ) is set to report fourth-quarter 2013 results on Feb 19. Last quarter, it posted 15.0% positive surprise. Let's see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Garmin's third-quarter earnings were above the Zacks Consensus Estimate driven by strong growth in new products that are increasingly diversifying its business. However, revenues of $643.6 million were down 7.6% sequentially and 4.3% year over year.

Gross margins also decreased 30 basis points (bps) sequentially but were up 140 bps year over year. The year-over-year increase was due to a favorable segment mix. Also, the amortization of previously deferred revenues helped margins. The operating margin shrank 80 bps sequentially and 20 bps year over year to 23.6% in the last quarter.

Earnings Whispers?

Our proven model does not conclusively show that Garmin will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:   Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 61 cents. Hence, the difference is 0.00%.

Zacks Rank: Garmin has a Zacks Rank #1 (Strong Buy) which, when combined with a 0.00% ESP, makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

You could consider other stocks with a positive earnings ESP and a Zacks Rank #1, 2 or 3 such as:

Westlake Chemical Corp. ( WLK ), with Earnings ESP of +4.50% and a Zacks Rank #1

Ship Finance International Limited ( SFL ), with Earnings ESP of +52.63% and a Zacks Rank #1

ProAssurance Corporation ( PRA ), with Earnings ESP of +13.59% and a Zacks Rank #1

GARMIN LTD (GRMN): Free Stock Analysis Report

PROASSURANCE CP (PRA): Free Stock Analysis Report

SHIP FIN INTL (SFL): Free Stock Analysis Report

WESTLAKE CHEM (WLK): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: GRMN , PRA , SFL , WLK

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