Garmin (GRMN) posted modestly better-than-expected Q1 results, with the fitness segment again standing out, Morgan Stanley said Wednesday in a report.

The fitness business delivered "outsized growth," with revenue acceleration at an 11-year high and gross margins expanding by 470 basis points, the report said.

Garmin's unchanged full-year outlook is "typical this early in the year," with room for estimates to move higher, Morgan Stanley said. Management also does not expect a deterioration in high-end consumer spending, with demand remaining strong and resilient to geopolitical tensions, the report said.

While inflation in component costs is expected to have only a small effect this year, Morgan Stanley said it will likely become a headwind in 2027.

The firm raised its 2026 EPS estimate to $9.80 from $9.50 on better-than-expected profitability. Its 2027 EPS forecast is now $10.36, down 1%, partly reflecting expectations for higher component costs next year.

Morgan Stanley lowered its price target on Garmin stock to $249 from $252 and maintained its equal-weight rating.

Price: 249.33, Change: -3.75, Percent Change: -1.48