How Analysts Are Changing Their Views on Garmin

The day before Garmin Ltd. (NASDAQ: GRMN) reported fourth-quarter results, the stock closed down almost 29% for the previous 12 months. After the results were announced, the stock added about 12% to reduce the 12-month loss to around 17%.

The company’s report was really a mixed bag: profits were down more than a third year over year but still beat estimates. Revenues were also higher than analysts expected. But the real kicker was guidance based on strong demand for fitness and aircraft navigational devices.

Analysts were more mixed in their reactions than were investors who pushed the share price up sharply. S&P Capital IQ was the most downbeat on Garmin:

We raise our 12-month target $3 to $36, or 15.9X our ’16 EPS estimate of $2.26 (cut $0.13). We set ’16’s EPS projection at $2.30. Our multiple is below its 5-year average forward P/E of 17X, on limited near term earnings growth visibility. GRMN’s pro-forma Q4 EPS of $0.74, vs. $0.77, was above our $0.51 forecast and the $0.48 Capital IQ consensus estimate, on better than expected revenues and a lower than expected tax rate. We are positive on GRMN’s new products, strong balance sheet, diversification efforts and 5.0% dividend yield, but above our target, our opinion is Sell.

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Other ratings we noted:

• Baird raised its price target from $39 to $40 with a Neutral rating.
• JPMorgan downgraded it from Neutral to Underweight, but raised its price target from $33 to $36.
• Raymond James raised its price target from $40 to $44.
• Merrill Lynch maintained its price objective at $47 and reiterated a Buy rating.

Garmin’s shares closed down about 2% on Friday, at $39.97 in a 52-week range of $30.93 to $50.79. The consensus price target on the stock is $40.11, although the recent changes may not yet be in the calculation.