J.P. Morgan Previews GRMN 4Q

In a 4Q preview released this morning, J.P. Morgan said that it believes there “could be downside to Garmin Ltd. GRMN estimates for the upcoming 4Q10 results and FY11 guidance could disappoint.” “At CES, GRMN's CFO stated that PND revenues could be down ~20% in 2011,” J.P. Morgan writes. “2011 could be a tough year for GRMN; however, the company will continue to generate cash, will pay a 5% dividend and could be well positioned to return to growth in 2012. Maintain Underweight. “We look for GRMN to report $0.80 EPS on sales of $846.5 million (Street: $0.88/$865.1mm); PND sales of $592.3mm. We look for a 4.5% y/y improvement in outdoor/fitness sales, y/y flat aviation and marine sales. We estimate gross margin of 44.0% and operating margin of 22.6%. J.P. Morgan believes that there could be upside to the outdoor/fitness segment, adding, “The field is more crowded but GRMN remains the clear leader in this segment.” Garmin Ltd. closed Friday at $33.02.