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Is Garmin (GRMN) Poised to Beat Earnings this Season?

Zacks Equity Research

Garmin Ltd. (GRMN) is set to report second-quarter 2014 results on Jul 30. Last quarter, it posted a 25.0% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Garmin posted strong first quarter 2014 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 revenue increase was driven by mix changes and reduced revenue deferrals.

Garmin’s results indicate that the company is successfully diversifying its business away from the shrinking PND market. This has been possible because of focused research and development efforts that have resulted in a steady flow of innovative higher-margin products. The company is also increasingly collaborating with OEMs for product designing, which is leading to greater volume, predictability and more stable pricing.

In the reported quarter, the traditional PND business shrank to less than 50% of its total business, although Garmin remains the market leader. On the other hand, Garmin is seeing good growth in its target markets, all of which carry higher margins.

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 75 cents. Hence, the difference is 0.00%.

Zacks Rank: Garmin’s Zacks Rank #3 (Hold), 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:

  • Charter Communications, Inc. (CHTR), with Earnings ESP of +375.00% and a Zacks Rank #1 (Strong Buy)

  • Synaptics Inc. (SYNA), with Earnings ESP of +4.07% and a Zacks Rank #1

  • TIM Participacoes S.A. (TSU), with Earnings ESP of +16.67% and a Zacks Rank #1

Read the Full Research Report on GRMN
Read the Full Research Report on CHTR
Read the Full Research Report on TSU
Read the Full Research Report on SYNA


Zacks Investment Research