Company guidance is one of the ways the market understands its future potential. A company that anticipates a positive outlook for upcoming quarters or the coming end of the fiscal year shows confidence in its growth prospects and financial success. Guidance is also one of the attributes analysts and market experts look at during earnings releases to understand better how the business anticipates upcoming performance.
Investors can use company guidance as a potential risk mitigation strategy; this gives them a solid idea of how the company anticipates future performance and how the markets affect industry operations. This also indicates that the company is transparent with its current and potential shareholders. While guidance may not be the only factor that moves prices, it significantly boosts analyst and investor sentiment in the company. Finding companies with such positive sentiments can help narrow your search for worthy investments. In this article, we will look at three companies with positive guidance and strong financial performance that are worth looking at now.
Arista Networks, Inc. (ANET)
Arista Networks, Inc. is a cloud networking company providing software solutions. Its services include network applications, routing platforms, Gigabit Ethernet switching, and Extensible Operating Systems (EOS). The company has a single-tier Spline campus network that extends the EOS across wireless & campus-wired workspaces and data centers. In addition, Arista offers CloudVision, its network-wide approach to automation and workload orchestration, and delivers cloud networking solutions to its enterprise customers. Its customers include financial services organizations, government agencies, entertainment companies, and other cloud service providers.
ANET reported a solid financial quarter, with earnings beating estimates by 15.60%. The company’s sales reached $1.509 billion, a 3.46% increase in quarter-on-quarter and a significant 28.3% growth from last year. Arista’s GAAP gross margin also improved to 62.4%. According to the company’s filings, its solid third quarter is due to its strong momentum in the cloud/AI and enterprise sectors. ANET has a positive financial outlook for the fourth quarter and anticipates its revenue to end between $1.5 billion and $1.55 billion.
Analyst Ratings
Analysts rate ANET as a “Moderate Buy” based on 13 Strong Buys, 2 Moderate Buys, and 6 Holds. The mean target for ANET is $210.28, and the high target is $232.00, representing an upside of 10.69% based on the last trading price.
Motorola Solutions, Inc. (MSI)
Next on our list is Motorola Solutions, Inc., which specializes in enterprise security and public safety with its land mobile radio communications (LMR), video security, analytics, access control, and command center software. The company operates in the software and services segments by offering unified communications applications, public safety and enterprise Command Centers, and other equipment and software solutions. Its products and systems integration operations have a portfolio of infrastructure devices, video security infrastructure, and various devices and applications.
MSI’s recent financial quarter proved it is still keeping up with the market despite the slow growth. Recent EPS beat analyst estimates by 6.45%. Sales increased by 8% YoY, with software and service sales growing by 12% and products and systems integration by 5%. MSI also saw an increase in GAAP EPS by 66% YoY. According to the Q32023 report, the strong performance stemmed from increased security and safety sector demands. This strong momentum has led to MSI upping its Q4 outlook to a potential 4% growth in revenue from last year.
Analyst Ratings
Analysts rate MSI a “Moderate Buy” based on 5 Strong Buys, 1 Moderate Buy, and 3 Holds. The mean target price for MSI is $321.50, while the high target price is $335.00, a potential 8.35% increase.
Garmin Ltd. (GRMN)
Garmin Ltd. is one of the most popular companies in the GPS market. The company specializes in global positioning system (GPS) products and other related devices. Garmin offers products for auto navigation, aviation-related products, outdoor handheld products, and wearables. Its health and fitness trackers and auto navigation are the most popular products in the consumer market. Its latest offerings, like Echomap Ultra 2 and GSD 28, are its latest releases for its marine segment of products.
GRMN’s latest EPS report beat expectations by 9.30%. Quarterly sales also increased by 12% year-on-year. The company reported robust growth in several segments like outdoor, aviation, and fitness; operating income grew 13% YoY as a result. Garmin launched its new Venu3 wearables last quarter, offering expanded health and wellness features and a 14-hour battery life. In addition, the company also completed the acquisition of JL Audio to strengthen its marine entertainment portfolio further. President and CEO Cliff Pemble has also stated that the strong performance and robust lineup of innovative products strengthened GRMN's position for the holiday season.
Analyst Ratings
GRMN is rated as a “Moderate Buy” by analysts based on 2 Strong Buys and 4 Holds. The mean target is $127.80, and the high target is $165.00, a potential increase of 42.14%.
Final thoughts
The market loves strong performers; people refer to them when they discuss “following the money”. However, investors should also not forget to assess the companies they buy and the reason behind the rise. While strong momentum has its advantages, it also has its flaws. Proper due diligence and risk management should be required when investing in any financial instrument.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
