Garmin's Price Target Raised By Credit Suisse, Says 'Bounce Disregards Flattish Guide'

• The share price of Garmin Ltd. GRMN appreciated 26.26 percent over the past one month, rising to $41.49 on February 17.
• Robert Spingarn of Credit Suisse has maintained an Underperform rating on the company, while raising the price target from $32 to $36.
• The company reported robust Q4 results, with the EPS significantly beating the consensus expectations.

Analyst Robert Spingarn mentioned that Garmin reported its Q4 adjusted EPS at $0.74, meaningfully above the consensus of $0.48, driven by robust sales and higher than expected margins. This in turn drove the stock up 16.5 percent.

According to the Credit Suisse report, “Q4 results were certainly good, and even absorbed a headwind from litigation costs in Marine that drove that segment's earnings negative in the Q.”

The biggest upside surprise came from the aviation and outdoor businesses, with the former reporting revenue growth of 12 percent, despite the challenging environment in the industry, driven by a rush of year-end deliveries, along with a better OE mix.

Related Link: Garmin Surges On Q4 Beat, Encouraging Guidance

Spingarn expects new aircraft EIS to drive potential upside of 5 percent for the Aviation business in 2016.

Outdoor sales, on the other hand, grew 6 percent, driven by more favorable comps and strength in the outdoor wearables category.

“Overall margins were also much stronger than expected, with strength across the board (except Marine given litigation costs), but here again the biggest improvements were Outdoor and Aviation,” Spingarn said.

However, management guided to flat revenues for 2016, with 18 percent operating margin and acquisitions leading to a 5-cent headwind to the EPS, which was guided to $2.25.