Garmin Ltd. (GRMN) is slated to report third-quarter 2014 results on Oct 29. In the last reported quarter, Garmin recorded a positive earnings surprise of 36%. Let’s see how things are shaping up for this announcement.
Factors to Consider This Past Quarter
Garmin reported strong second-quarter 2014 earnings of $1.02 per share, comfortably beating the Zacks Consensus Estimate of 75 cents on the back of strong growth in new products that are increasingly diversifying its business.
The company is increasingly collaborating with OEMs for product designing, which is leading to greater volumes, predictability and more stable pricing.
In the past 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. Additionally, Garmin increased its 2014 guidance, indicating a strong demand environment for its products, going forward.
Earnings Whispers
Our proven model does not conclusively show that Garmin is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. 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 72 cents. Hence, the difference is 0.00%.
Zacks Rank: Garmin currently has a Zacks Rank #3 (Hold). Though Zacks Ranks #1, 2 or 3 increase the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat:
Facebook Inc. (FB) has an Earnings ESP of +6.25% and a Zacks Rank #2 (Buy).
Seagate Technology (STX) has an Earnings ESP of +2.40% and a Zacks Rank #3 .
Mercadolibre, Inc. (MELI) has an Earnings ESP of +6.25% and a Zacks Rank #3.
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