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


Garmin Ltd. ( GRMN ) is set to report first-quarter 2014 results on Apr 30. Last quarter, it posted a 24.6% positive surprise. Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Garmin posted better-than-expected fourth quarter 2013 results with both the top and bottom lines surpassing the Zacks Consensus Estimate. The bottom line exceeded expectations on the back of strong growth in new products that are increasingly diversifying its business.

The company is successfully diversifying its business away from the shrinking personal navigation device (PND) market. The PND market weakness continued in the last quarter, even though Garmin remains the market leader in the category. The decline was partially offset by growth in original equipment manufacturers (OEM) and mobile product categories.

Though company expects the PND market to continue to impact top- and bottom-line results, management provided an encouraging guidance indicating strong growth.

Garmin expects 2014 revenues in the range of $2.6-$2.7 billion, gross margin of 54-55%, operating income of $530-$565 million, operating margin of approximately 21%, tax rate of 17% and pro-forma earnings per share of $2.50 to $2.60. The Zacks Consensus Estimate for the year is pegged at $2.53 per share, which is at the lower end of the guidance range.

Earnings Whispers?

Our proven model does not conclusively show that Garmin will beat estimates 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 44 cents. Hence, the difference is 0.00%.

Zacks Rank : Garmin's Zacks Rank #2 (Buy), 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

Here are some other companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Advanced Energy Industries, Inc. ( AEIS ), with Earnings ESP of +10.00% and a Zacks Rank #1 (Strong Buy).

ON Semiconductor Corp. ( ONNN ), with Earnings ESP of +6.67% and a Zacks Rank #1.

ADV ENERGY INDS (AEIS): Free Stock Analysis Report

GARMIN LTD (GRMN): Free Stock Analysis Report

ON SEMICON CORP (ONNN): 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 The NASDAQ, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AEIS , GRMN , ONNN



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