Garmin Ltd. Just Beat EPS By 20%: Here's What Analysts Think Will Happen Next

As you might know, Garmin Ltd. (NASDAQ:GRMN) just kicked off its latest full-year results with some very strong numbers. It was overall a positive result, with revenues beating expectations by 2.5% to hit US$3.8b. Garmin reported statutory earnings per share (EPS) US$4.99, which was a notable 20% above what analysts had forecast. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.

Check out our latest analysis for Garmin

NasdaqGS:GRMN Past and Future Earnings, February 22nd 2020
NasdaqGS:GRMN Past and Future Earnings, February 22nd 2020

Following the latest results, Garmin's eight analysts are now forecasting revenues of US$3.99b in 2020. This would be a credible 6.1% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to dip 7.3% to US$4.65 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$3.84b and earnings per share (EPS) of US$4.30 in 2020. So there seems to have been a moderate uplift in analyst sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.

Although analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$96.63, suggesting that the forecast performance does not have a long term impact on the company's valuation Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Garmin analyst has a price target of US$110 per share, while the most pessimistic values it at US$81.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We can infer from the latest estimates that analysts are expecting a continuation of Garmin's historical trends, as next year's forecast 6.1% revenue growth is roughly in line with 5.3% annual revenue growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the are forecast to see their revenues grow 5.6% per year. So although Garmin is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider market.

The Bottom Line

The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Garmin following these results. There was also an upgrade to revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. The consensus price target held steady at US$96.63, with the latest estimates not enough to have an impact on analysts' estimated valuations.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Garmin analysts - going out to 2022, and you can see them free on our platform here.

You can also see our analysis of Garmin's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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