Garmin Beats, Secular Pressure Remains (GRMN, GOOG, NOK, AAPL, TNAV)

Garmin’s gross margin was 54% versus 53% a year ago.  Net income after items was down to $134.8 million from $161.9 million a year ago.  The PND segment showed a 2% growth in the last quarter, while its outdoor/fitness unit grew by 32% and the marine unit gained by 23%.

The 2010 guidance is being negatively affected by unfavorable currency effects and what the company called a slight decline at its personal navigation device segment.  Garmin sees revenues in a range of $2.8 to $3 billion, down from a prior projection earlier this year of $2.9 to $3.1 billion.  The new guidance is still within line of the Thomson Reuters estimate of $2.88 billion.  Earnings were put in a range of $2.75 to $3.15 EPS, which is compared to Thomson Reuters’ estimates of $2.91 EPS.

While 2011 guidance is not offered, analysts are expecting contraction here as estimates are $2.73 EPS and $2.82 billion in revenues.

Garmin faces continued pressure against competition, something which is only getting more and more of the case through time.  TomTom may not be as much of a threat as before, but Google Inc. (NASDAQ: GOOG) and Nokia Corp. (NYSE: NOK) offer free navigation on smartphones.  Apple Inc. (NASDAQ: AAPL) is also being used for its maps despite the mapping service not being in the same caliber.  TeleNav, Inc. (NASDAQ: TNAV) also offers personal navigation through phones, although its disclosures with recent earnings about its largest customer (Sprint) leave the feeling that the company is not exactly a Garmin-killer.

Sales of Garmin’s own smartphone (Nuvi) product category contributed only $27 million in revenue during the quarter. Those products have been on the market for a very short period time.  The problem is that there are very few of those phones being sought after in a world of BlackBerry, Droid, and iPhones.

Garmin is not a story of a company that cannot meet its estimates.  This is just an issue where the field is changing and cheaper and nearly free alternatives are becoming available that will act as a case of ongoing secular competition.

Garmin was already braced for a report less than what we got as shares were down about 20% over the last three months.  Shares opened up at $30.35 after a $29.35 close yesterday, but now shares are trading up 1.35% at $29.75 right after the open.  The 52-week range is $26.54 to $40.47.

JON C. OGG