Garmin Q3 Earnings: Can NasdaqGS:GRMN Hit Its $1 EPS Target?

in EARNINGS/INVESTING IDEAS by

Garmin Ltd. (NasdaqGS:GRMN) is scheduled to report Q3 earnings results before markets open for trading on October 28, 2020.

The company is expected to report earnings of $1/share on revenue of $897.7 million. The consensus earnings per share (EPS) of $1/share is based on a poll of 9 analysts and represents a decline in eps of −21.2% over the same quarter last year, when the company reported earnings of $1.27/share.

The revenue forecast of $897.7 million based on a poll of 8 analysts implies a year-over-year (YoY) decline in revenue of −3.9%. Last year the company reported $934.4 million in revenue for the quarter.

Expected to report EPS contraction of −21.2% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $897.73 $934.38 −3.9%
EPS $1 $1.27 −21.2%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from Garmin Ltd. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.41 $0.91 122.2% Beat
Q1, 2020 $0.81 $0.91 12.3% Beat
Q4, 2019 $1.05 $1.29 22.4% Beat
Q3, 2019 $0.97 $1.27 31.3% Beat
Q2, 2019 $1.01 $1.16 15.3% Beat
Q1, 2019 $0.71 $0.73 2.3% Beat
Q4, 2018 $0.80 $1.02 26.9% Beat
Q3, 2018 $0.77 $1 29.7% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 27, 2020, the stock price did not react much to the update.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 29, 2020 $99.36 $100.01 0.7% Increase
April 29, 2020 $83.40 $81.16 −2.7% Decline
February 19, 2020 $97.12 $99.81 2.8% Increase
October 30, 2019 $87.91 $93.75 6.6% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.57, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.57 implies a 0.5% chance of earnings manipulation.

Fundamentals And Technical Analysis

Garmin Ltd. is currently trading at $99.42/share, down −1.4% for the day. The company is trading at approximately 93.8% of its 52-week high of $106/share. The company’s stock price is down −0.6% since the last earnings report and up 0.6% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 52.25 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:GRMN Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 20.36 and a forward P/E multiple of 23.69.

Garmin Ltd.’s current share price also implies a price-to-book (P/B) multiple of 4.01. The following table summarizes some other key fundamental ratios:

Data as of October 26, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 27, 2020
Stock Price (Current) $99.42
P/E Ratio 20.4x
P/E Ratio (Fwd) 23.7x
PEG Ratio 0.8
Total Debt / Total Capital 0.3%
Levered Free Cash Flow $692.6 million
EV / EBITDA 15.1x

Finbox

Garmin Ltd. is a large-cap stock with a market capitalization of $19.013 billion and a total enterprise value of $16.344 billion. The company operates in the Consumer Discretionary sector and the Household Durables industry.

Garmin Ltd. designs, develops, manufactures, markets, and distributes a range of navigation, communication, and information devices worldwide. It operates through five segments: Auto, Aviation, Marine, Outdoor, and Fitness. The Auto segment offers personal navigation devices; infotainment systems; and cameras, as well as mobile applications. The Aviation segment provides flight display, navigation, communication, flight control, hazard avoidance, weather radar, radar altimeter, and in-cockpit and cloud connectivity products; datalink weather receivers and services; engine information, traffic collision avoidance, and terrain awareness and warning systems; wearables, portables, and apps; and training, simulation, flight planning/filing, premium trip, and aviation data services. This segment also offers controller-pilot data link, a suite of automatic dependent surveillance broadcast solutions. The Marine segment provides chartplotters and multi-function displays, cartography products, fish finders, sounders, autopilot systems, radars, compliant instrument displays, VHF communication radios, handhelds and wearable devices, sailing products, entertainment, and digital switching equipment. The Outdoor segment offers outdoor handhelds, smartwatches, golf devices, and dog tracking and training devices; Garmin Connect and Garmin Connect Mobile, which are Web and mobile platforms; and Connect IQ application development platform. The Fitness segment provides running/multi-sport watches, cycling computers, cycling power meters, cycling safety and awareness products, and activity tracking devices. The company sells its global positioning system receivers and accessories to retail outlets; and aviation products to aviation dealers and aircraft manufacturers through a network of independent dealers and distributors. Garmin Ltd. was founded in 1990 and is based in Schaffhausen, Switzerland.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.