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Bull of the Day: Garmin Ltd. (GRMN)

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Garmin (GRMN - Free Report) became famous for its in-car GPS devices, smartwatches, and fitness trackers that compete against the likes of Apple (AAPL - Free Report) and Fitbit (FIT - Free Report) . The electronics firm, which topped our Q4 estimates, also sells everything from high-end fish finders to advance radars for aviation and boating.

Garmin’s Pitch to Investors

Garmin’s in-car navigation systems helped it become a household name, but its automotive business has faltered recently as smartphones become ubiquitous and carmakers build in their own offerings. In fact, its auto unit sales dipped 14% in 2019. Despite the downturn, Garmin’s overall fiscal 2019 sales jumped 12% to $3.76 billion.

The Switzerland-headquartered firm on February 19 topped both our fourth quarter 2019 earnings and revenue estimates. GRMN noted that fitness, aviation, marine, and outdoor revenue collectively jumped 18%. “We entered 2020 with a great lineup of recently introduced products with more on the way,” CEO Cliff Pemble said in prepared remarks. “We are excited about the future because each business segment offers unique growth opportunities for 2020 and beyond.”

 

 

 

 

Other Fundamentals

GRMN’s 2019 sales growth came on top of 2018’s 7.2% revenue expansion and represents the fourth straight year of top-line expansion. Along with its revenue growth has come solid stock price performance, with shares up 65% in the last five years to top its industry’s 57% average.

More recently, Garmin shares have jumped over 33% in the last two years to easily top its industry’s 7% climb. The stock has fallen over the last month and is down about 18% from its late February 2020 highs at around $81.16 a share. This downturn coincides with the broader coronavirus-based market selloff that is now racing to end the bull market after stocks tumbled again Monday.

Clearly, some investors might want to stay away from buying given that the coronavirus continues to spread outside of China, in the U.S. and beyond. With that said, it never hurts to add stocks to your watchlist. And Garmin announced last month that it proposed to raise its dividend by 7%, which would put the new quarterly payout at $0.61 a share, up from $0.57 per share.

 

 

 

 

Even without this planned increase, Garmin’s yield currently rests at around 2.8%. This easily tops Apple’s 1.07%, Microsoft’s (MSFT - Free Report) 1.26%, and the S&P 500’s 2.04% average, which is based on the SPDR S&P 500 ETF Trust (SPY - Free Report) .

On the valuation side, GRMN is trading at 18.8X forward 12-month earnings estimates right now. This marks a discount compared to its one and three-year high of 24.1X, as well as its three-year median of 19.9X. Plus, GRMN’s Electronics - Miscellaneous Products industry sits in the top 31% of our 255 Zacks Industries.

Outlook

Moving on, our current Zacks estimates call for Garmin’s first quarter sales to pop 9.4% to reach $838.4 million. Meanwhile, the company’s fiscal 2020 sales are projected to jump 6% to $3.98 billion, with 2021’s figure set to pop another 4.4% to reach $4.16 billion.

At the bottom end of the income statement, Garmin’s adjusted Q1 earnings are projected to surge 18% to come in at $0.86 a share. Overall, the company’s adjusted fiscal year EPS figures are expected to climb by 3.6% in each of the next two years. This would come on top of 2019’s 21% earnings growth.

 

 

 

 

Bottom Line

The nearby chart helps show investors how much Garmin’s longer-term earnings estimates have climbed since it posted it Q4 results. This positivity helps it earn a Zacks Rank #1 (Strong Buy) at the moment, which coupled with its dividend yield, might make it worth considering.

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