Tuesday, May 4, 2010

Garmin Ltd. (NASDAQ: GRMN): Q1 Earnings Preview

Garmin Ltd. (NASDAQ: GRMN) is scheduled to release its first-quarter earnings before the opening bell on Wednesday, May 5, 2010. Analysts, on average, expect the company to report earnings of 41 cents per share on revenue of $483.49 million. In the year ago period, the company reported earnings of 25 cents per share on revenue of $436.7 million.

Garmin Ltd., together with its subsidiaries, designs, develops, manufactures, and markets global positioning system (GPS)-enabled products and other navigation, communication, and information products worldwide. It operates in four segments: Automotive/Mobile, Outdoor/Fitness, Marine, and Aviation.

In the preceding fourth quarter, the Camana Bay, Cayman Islands-based company reported that its net income jumped 77% to $278.41 million, or $1.38 per share, from $157.73 million, or $0.78 per share, in the previous-year quarter. Excluding the impact of foreign currency transaction loss, pro forma net income for the latest quarter rose to $288.43 million or $1.43 per share from $188.69 million or $0.93 per share in the same period last year. Revenue increased 1% to $1.06 billion from $1.05 billion. Analysts, on average, expected the company to report earnings of 95 cents per share on revenue of $955.66 million.

For fiscal year 2010, Garmin expects pro forma earnings in a range of $2.75 to $3.15 per share on revenues of $2.9 billion-$3.1 billion. It expects gross margin of around 46-48% and operating income of $675-$725 million, yielding an operating margin of 23-24%.

Personal navigation device makers like Garmin have been facing increased pressure from GPS-equipped smartphones. Last year, online search giant Google (NASDAQ: GOOG) said that it intends to add free turn-by-turn directions to the Google Maps app for smartphones using its Android operating system. Similarly, Nokia (NYSE: NOK) recently announced that it will offer navigation on its handsets for free. Unlike Google, the navigation offered by Nokia will not even require an internet connection. Technology research firm iSuppli believes that in 2011, nearly 100 percent of all smartphones shipped will integrate GPS functionality. It expects the number of smartphones with navigation programs to exceed the number of GPS devices by 2014.

It appears that Garmin has recognized the growing threat from smartphones. The company has already made its entry into rapidly growing smartphone market and has launched a number of smartphones in recent times.

In terms of stock performance, Garmin shares have gained nearly 50 percent over the past year.

Full Disclosure: None.
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