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Garmin Ltd. (GRMN - Analyst Report) is set to report fourth quarter fiscal 2012 results on Feb 20. Last quarter it posted an 18.03% negative surprise. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Garmin’s sales growth rates in the third quarter were higher than the year-ago quarter due to strength in Outdoor and Aviation segments. Garmin is witnessing great success in the Aviation segment due to opportunities in the Part 25 certification market and Outdoor segment owing to the launch of many new products, which are gradually expanding its markets.

However, all other segments performed poorly in the last quarter due to weak economic conditions across the world and particularly in Europe. In terms of margin growth, the second quarter was strong for Garmin due to favorable product mix and higher volumes.

The company has been introducing various new higher-margin products and growing its strength in all segments other than the portable navigation device (PND) segment. We believe that the company’s significant exposure to the PND segment, which is on a secular decline, will continue toweigh on results.

Though the company has seen significant pricing stabilization in the PND market, it has failed to deliver in terms of volumes. We think that Garmin could ultimately improve upon the situation by focusing on auto OEMs for in-dash solutions and by building a presence in emerging Asian countries.

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 (Read: Zacks Earnings ESP: A Better Method) 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:  The Most Accurate estimate stands at $0.64 while the Zacks Consensus Estimate is higher at $0.75. That is a difference of -14.67%.

Zacks Rank #4 (Sell): Garmin’s Zacks Rank #4  (Sell) lowers the predictive power of ESP because the Zacks Rank #4 when combined with a negative 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:  

Autodesk Inc. (ADSK - Analyst Report), with an ESP of +15.79% and a Zacks Rank #2 (Buy).

Netflix Inc. (NFLX - Analyst Report), with an ESP of +42.86% and a Zacks Rank #2 (Buy).

Scientific Games Corporation (SGMS - Analyst Report), with an ESP of +33.33% and a Zacks Rank #3 (Hold).

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