Garmin Stock Breaks Out on Strong Earnings and Outlook
Garmin Ltd. (GRMN) shares rose more than 6% during Wednesday’s session after the company reported better-than-expected fourth quarter financial results. Revenue rose 18% to $1.1 billion, beating consensus estimates by $90 million, and non-GAAP net income reached $1.29 per share for the quarter, beating consensus estimates by 24 cents.
Looking ahead, the company anticipates full-year 2020 revenue of $4 billion, ahead of consensus estimates calling for $3.78 billion, and pro forma earnings per share of $4.60, beating consensus estimates calling for $4.07. Management also expects gross margins to reach 59.2%, compared to 58% during the fourth quarter, and operating margins of 23.5%. Garmin also increased its quarterly dividend to 61 cents per share, which represents a 7% dividend yieldciting the strong financial results and outlook.
In January, Credit Suisse upgraded Garmin stock from Underperform to Neutral with a $100 price target. Analyst Robert Spingarn believes that headwinds from ADS-B sales in the aviation business were less severe than expected. A bottoming in auto segment sales and strength into other segments could help Garmin retain a mid-single-digit growth rate in 2020.
From a technical standpoint, the stock broke out from prior reaction highs to fresh 52-week highs. The relative strength index (RSI) moved toward overbought territory with a reading of 65.81, but the moving average convergence divergence (MACD) could have seen a bullish crossover. These indicators suggest that the stock could have room to run before consolidation.
Traders should watch for some consolidation above reaction highs of about $102.00 following the indecisive spinning top candlestick pattern. If the stock breaks down from these levels, traders could see a move toward the 50-day moving average at $98.17. The more likely scenario is that the stock rebounds toward fresh highs after some consolidation.
The author holds no position in the stock(s) mentioned except through passively managed index funds.