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Garmin Ltd (GRMN - Analyst Report) is set to report third quarter 2013 results on Oct 30. Last quarter it posted a 16.9% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Garmin recorded strong second quarter revenues and margin performance, with revenue growth in each of the traditional segments of Outdoor, Fitness, Marine and Aviation. Gross margins improved sequentially to 55% from 52% in the prior quarter as segment mix and product mix improved in the seasonally stronger second quarter.

The longer-term positives for Garmin remain the many new higher-margin products that the company has been introducing over the last few years and its strategy of increasingly targeting the OEM segment with its offerings. The advantage of this strategy is more stable revenues and steadier pricing over the long term.

Garmin’s management has decided to maintain its revenue ($2.5 billion - $2.6 billion) and pro forma earnings per share ($2.30 - $ 2.40) guidance for 2013.

Earnings Whispers?

Our proven model does not conclusively show that Garmin is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 60 cents. Hence, the difference is 0.00%.

Zacks Rank #1 (Strong Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. However, the combination of Garmin’s Zacks Rank # 1 (Strong Buy) and 0.0% 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 you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Arrow Electronics (ARW - Analyst Report), Earnings ESP of +0.83% and a Zacks Rank #2 (Buy)

Asml Holding NV (ASML - Snapshot Report), Earnings ESP of +1.63% and Zacks Rank #3 (Hold)    

Jarden Corp (JAH - Snapshot Report), Earnings ESP of +2.00% and a Zacks Rank #1 (Strong Buy)    


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