Track Garmin stock for a hint at next year’s rankings

05/05/2014 11:30 PM

05/16/2014 4:00 PM

A year ago, shares of Garmin lagged badly. The market was soaring, but Garmin was one of only four names on our stock update list that stood in negative territory.

The Olathe-based maker of GPS-driven consumer and business devices didn’t stay down long. Shares rebounded, and Garmin’s Star 40 ranking dipped only a few spots, to No. 14 from No. 10 a year ago.

It’s a lesson in forecasting. Trends change.

We often tout this story as a sneak peek at which companies have a head start on next year’s rankings. A climbing stock price lifts their market value and their growth in market value, two of our six criteria.

This year, Garmin’s Star 40 start looks strong. Its shares are doing well in a weak market, and many other perennial contenders are faring poorly.

Specifically, Garmin shares were up 24.6 percent this year through Friday. That’s fifth best among all Star 40 candidates for next year’s rankings. And Garmin looks good in other categories, according to an analysis by Andrew Spinola at Wells Fargo Securities.

Spinola noted that Garmin’s sales and profit margins improved in the first quarter — typically the company’s weakest. Its results can be volatile, he wrote to clients, but “these results are indicative of sustainable growth.”

Wall Street is being a bit tougher on No. 4 Cerner Corp., whose shares were down 7.8 percent through Friday, and No. 6 Kansas City Southern, off 19.8 percent through Friday.

But in the case of Cerner, analyst Richard Close with AvondalePartners LLC sees “continued momentum” in the company’s pipeline for business bookings, which are a source of future revenue and profit.

Kansas City Southern shares have been laid low this year by a delay in expected growth from its rail line in Mexico.

Jon Braatz, an analyst with Kansas City Capital Associates, said expanding auto production south of the border and new terminal facilities in the Gulf Coast looked more like factors in the second half of this year.

“While our long-term thesis on Mexico remains intact,” Braatz wrote in a note to clients, “it now appears that there will be a slower ramp-up in the new Mexican automobile plants, and project and permitting delays on the Gulf Coast.”

The pundits at CNBC recently noted something else about those two companies. On April 16, the cable channel’s 25th anniversary broadcast, they looked back to ask which “major companies” produced the best stock gains since April 16, 1989.

No. 1 was Kansas City Southern, whose stock had climbed by — and this is not a typo — 51,000 percent! And No. 4 on CNBC’s short list was Cerner, up a staggering 33,000 percent. Seriously. Here’s

the video

, and we double checked their math with the Bloomberg news services.

Still, their stocks’ more recent showing builds a bit of headwind for next year’s Star 40 rankings.

Other notables with falling stocks include Sprint Corp., ranked No. 8 in Star 40 this year; Euronet Worldwide Inc., ranked No. 3; and H Block Inc., ranked 12th.

Companies enjoying a tailwind from their stocks include a couple of the newly public companies. Energy play Tallgrass Energy Partners LP had climbed 38.4 percent through Friday, and QTS Realty Trust Inc. had seen its stock rise by 10.7 percent.

This is the second year in a row that shares of YRC Worldwide Inc. have been among the early leaders, up 22.7 percent through Wednesday.

A fraction of its former size, the trucking giant is still among the largest companies in Star 40, and it ranked No. 20 this year, compared with 36 and 37 in the two preceding years.

Early this year, the company gained new concessions from its union and a debt refinancing from its lenders. A strengthening economy would do wonders for its revenue, income and Star 40 ranking next year.

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