The Zacks Analyst Blog Highlights: Garmin, Apple, Google, Harman International Industries and Johnson & Johnson

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Jun 14, 2012, 09:30 ET

CHICAGO, June 14, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Garmin Ltd (Nasdaq:GRMN), Apple Inc. (Nasdaq:AAPL), Google Inc. (Nasdaq:GOOG), Harman International Industries Inc. (NYSE:HAR) and Johnson & Johnson (NYSE:JNJ).

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Here are highlights from Wednesday's Analyst Blog:

Garmin Faces Heat from Apple Maps

Garmin Ltd (Nasdaq:GRMN), a leading developer of personal navigational devices (PND) is expected to face heightened competition from consumer electronics giant Apple Inc. (Nasdaq:AAPL) following the recent launch of its new mapping software for iOS based devices.

The new mapping software is based on 3D technology. The application features turn-by-turn navigation system, real-time traffic data and is capable of offering alternative routes depending on traffic conditions. The software is also supported by Apple's voice application Siri, which was launched with iPhone 4S (on October 14, 2011).

Garmin enjoys a dominant position in the PND market space based on its popular products such as nuvi, zumo and street pilot application, all of which have been more or less represented in the new iOS software.

Garmin has been seeing tough competition from mapping and personal navigation software provided by Google Inc. (Nasdaq:GOOG) for quite some time. This was primarily due to the strong adoption of Google's Android-based smartphones. However, the competition is expected to get more intense once Apple enters the market with its new application.

We believe that the entrance of Apple poses a significant threat for Garmin going forward. This is particularly due to the massive popularity of Apple's iPhone and iPad devices. With the upcoming release of its updated mobile operating system iOS 6, Apple is completely removing the Google map service from its devices.

Being the market leader, Garmin is likely to be the most negatively affected by the growing number of players in the navigation segment. Of course, other players, such as such as Harman International Industries Inc. (NYSE:HAR) will also not go unscathed.

We think that Garmin is in danger of seeing a secular decline in demand for its GPS technology, which is rapidly becoming an inbuilt portion of electronic devices like smartphones and tablets.

Garmin has been diversifying its business over the past few years, although it continues to generate a significant percentage of its revenue from personal navigation devices sold through its auto/mobile segment.

Its efforts have resulted in greater stability and growth in the outdoor, fitness and marine segments in particular. Garmin is also well positioned in the aviation market, although recessionary pressures have impacted this business.

Currently, both Apple Inc. and Google Inc. have Zacks Rank of #2, implying a short-term Buy recommendation. On the other hand, Garmin and Harman International have a Zacks Rank of #3, implying a short-term Hold recommendation.

Synthes Deal to Be Accretive for J&J

Johnson & Johnson (NYSE:JNJ) is all set to complete its acquisition of Synthes, Inc. on June 14, 2012. The company, which received Federal Trade Commission (FTC) approval recently, will be acquiring Synthes for a total purchase price of approximately $19.7 billion in cash and stock.

For each share of Synthes, the shareholder will be entitled to receive CHF 55.65 in cash and 1.7170 shares of Johnson & Johnson common stock.

Antitrust approval from the European Commission was granted on April 19, 2012. Meanwhile, the FTC asked Johnson & Johnson to sell its system for treating distal radius wrist fractures. Johnson & Johnson said that it will be selling its entire trauma portfolio, including DVR, to Biomet. The sale is scheduled to go through later this month.

Johnson & Johnson announced that its wholly owned Irish subsidiary, Janssen Pharmaceutical, has signed a $12.9 billion accelerated share repurchase (ASR) programs with two investment bankers. The shares purchased under the ASR agreements, along with cash on hand from Janssen Pharmaceutical, will be used towards the purchase consideration for the Synthes deal.

With the company announcing the share buyback program and the financial structure for the deal, Johnson & Johnson now expects the Synthes acquisition to be accretive to earnings instead of dilutive as expected earlier. Earlier, the company had said that it expects the deal to be dilutive by 22 cents per share in 2012.

However, with the financial structure in place, the company now expects the acquisition to boost 2012 adjusted earnings by 3-5 cents per share. Meanwhile, 2013 earnings are expected to be boosted by 10-15 cents per share due to the acquisition.

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