Scientific and technical instruments company Garmin's (Nasdaq: GRMN) shares are currently trading more than 11 percent in the regular market trading after the company provided upbeat outlook for the year 2012. The stock crossed psychological $50 mark in the pre-market trading and traded more than 12 percent higher at one point of time.
The company delivered earnings and revenues for the fourth quarter that was way ahead of Street analysts' estimations boosting investors' confidence on the stock.
For 10 analysts, the mean price target is $41.75, while median target is $39, but high target is $55. Low price target for the stock is $33.
Garmin sees pro forma earnings of $2.45 - $2.60 a share for the year 2012 on revenues of $2.7 - $2.8 billion. The company's outlook is significantly higher than street analysts' estimation of $2.41 a share on revenues of $2.55 billion.
The company expects gross margin to be 49 – 50 percent, while operating margin are pegged between 19 percent and 20 percent for 2012. The optimism of revenue growth stems from upside seen in the fitness, marine, outdoor and aviation divisions. This will partly offset the fall in the personal navigation devices or PNDs sale. The company also expects to gain further market share in 2012 and improve its profitability.
For the fourth quarter, Gamrin reported net income of $187.49 million, up 16 percent from $161.6 million and earnings increased 25 percent to 85 cents a share from 68 cents a share in the year earlier quarter. On a pro forma basis, earnings would have increased 15.7 percent to 96 cents a share from 83 cents a share in the year-ago quarter.
Revenues grew 9 percent to $910 million from $838 million in the previous year quarter. Analysts' predicted the company to deliver earnings of 66 cents a share on revenues of $769.94 million for the fourth quarter.
Importantly, outdoor, fitness and marine divisions posted upside of 35 percent, 17 percent and 16 percent respectively, while aviation division revenue rose slightly.
Gross margin showed improvement to 48 percent from 45 percent, while operating margin was flat at 22 percent for the fourth quarter.
Our Take:
The important thing is that Gamrin is confident of improving its market share in PND market. The stock is reacting favorably to company's strong quarterly results as well as upbeat outlook. The stock is likely to see corrections as it is trading at 52-week high. Any downside in the stock can be considered for entering the counter.