(GRMN) Garmin Limited – Bull of the Day

Garmin Ltd. (GRMN) is an OEM of GPS-based equipment. September quarter earnings thrashed the Zacks Consensus Estimate and 2011 guidance was raised. Garmin s market share, brand equity, compelling new products across segments, significant diversification of revenue, strategic alliances and financial position may be expected to offset the negative impact of a secular decline in its core PND business.

We are buyers of the shares at the current valuation, since we believe that Garmin has the position and financial muscle to overcome the fierce competition, pricing pressure and PND cannibalization by smartphones. Garmin’s current trailing 12-month earnings multiple is 14.0X, compared to the 16.2X average for the peer group and 17.0X for the S&P 500.

We note that Garmin’s expected earnings growth rate of 15.0% over the next 5 years is similar to the 15.5% growth expected of its peers, but significantly higher than the S&P 500, which indicates upside. We therefore have an Outperform rating on Garmin shares and raise our target price to $42 (17.1X 2011 EPS).

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