Garmin Holding Up Better Than You Think (GRMN)

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Garmin Ltd. (NASDAQ: GRMN) appears to have pulled a rabbit out of the hat and its stock is indicated higher after the GPS leader managed to beat earnings expectations.  The company posted earnings of $0.87 non-GAAP EPS vs. $0.84 estimates, and that is only a 2% decline from 2007 levels.  Revenues were $870 million vs. $865 million estimates. 

It guided the year to $3.78 excluding a $0.27 item from a tender versusestimates of $3.89 estimates.  Revenues for the year are expected to beabout $3.6 billion vs. estimates of $3.8 billion.  It expects operatingmargins to be 24% for the full year, and it sees its tax rate at 19%this year vs. 12% last year.

What is interesting here is that this is still growth of 19% onrevenues from last year, and its automotive/mobile segment showed a 21%gain to $626 million.  Outdoor/Fitness revenues rose 35% to $119million, while aviation rose 9% to $81 million.  Its marine segmentdeclined 8% to $44 million.

Gross margin for the overall business in the third quarter came in at44.3%, a 150 basis point decline sequentially attributed to theweakening of the Euro against the US dollar.

Geographically was somewhat surprising with North America up 29% to$585 million and Europe up 9% to $247 million in revenues.  Asiarevenues were down 21% to $38 million. 

The GPS giant is scaling down operations due to the slowing economy.It is reducing its inventory by $150 million by year end and says itsNuvifone is on track for delivery in the first half of 2009.

We have yet to see any trades and have not seen any formal priceindications with two hours to go before the open, but all in all thisis actually an impressive report when you consider how tough theenvironment is.

Shares closed yesterday at $21.43 and its 52-week trading range is $19.90 to $124.75.

Jon C. Ogg
October 29, 2008