PREVIEW-Garmin profit seen in line with Street, may cut outlook
* Garmin (GRMN.O: Cotización) second-quarter results
* On Wednesday, July 30
* Sales seen at $955.6 mln, earnings at $1.01 a share
* Analysts expect at least an in-line Q2 result
* Seen lowering 2008 outlook
* Investors to look out for information on "nuvifone"
By Purwa Naveen Raman
BANGALORE, July 29 (Reuters) - Navigational device maker Garmin Ltd (GRMN.O: Cotización) may post a second-quarter profit in line with Wall Street estimates, driven by good demand for its devices in the United States, even as pricing and margin concerns persist.
Encouraged by Dutch rival TomTom's (TOM2.AS: Cotización) strong results last week, analysts say Garmin, known for its popular range of 'nuvi' personal navigation devices (PNDs), will benefit from the favorable environment that helped its chief competitor.
"There is very good volume growth in the United States and good but moderate growth in Europe," analyst Scott Sutherland of Wedbush Morgan Securities said by phone.
Last week, TomTom beat market expectations with a rebound in sales and operating profit after a slump in the first quarter, and said demand for its products had held up. [ID:nL21825806]
Analysts, however, believe that Garmin might lower its outlook for the full year.
"We believe Garmin will modestly reduce 2008 guidance, but that it would remain above consensus estimates, which will likely be taken positively," Sutherland said in a research note.
For the second quarter, TomTom's strong sales were driven by a robust 140 percent unit growth in North America. Garmin has a higher exposure in the region, with almost 50 percent market share. Sutherland said he was expecting a unit growth of well over 100 percent for Garmin in the United States.
According to Reuters Estimates, analysts on average expect Garmin to post a profit of $1.01 per share for the period, compared with 98 cents a share a year ago.
Revenue is expected to rise almost 29 percent to $955.6 million. Garmin reports second-quarter results on Wednesday.
Garmin and TomTom dominate the PND market, which has seen scorching growth in the last few years. But since the start of the year, intense competition and several new entrants have chipped away at the huge margins they used to enjoy.
Analysts say gains from unit growth will likely be offset by a fall in average selling prices, which are expected to continue their decline into the second quarter.
In addition, Cayman Islands-based Garmin's earnings will be weighed down by a higher tax rate in Taiwan, where its key manufacturing units are located, and by macroeconomic woes.
Investors will also be on the lookout for an announcement on the company's proposed smartphone "nuvifone", slated to be launched in the fourth quarter.
The company has yet to disclose pricing and carrier details for the nuvifone, which will compete against giants Research In Motion's RIM.TO RIMM.O BlackBerry Pearl 8110 and Nokia's NOK1V.HE N95 and N82 multimedia phones.
Apple Inc's (AAPL.O: Cotización) latest version of its popular iPhone also includes navigation capability.
"We see potential PND catalysts with the introduction of the nuvifone and new carrier deals later this year," Robert W. Baird & Co's Reik Read said in a research note dated July 22.
Following is a breakdown of analysts' estimates:
Revenue* Earnings* Gross margin Operating margin
($, mln) ($/shr) (%) (%) Average 955.6 1.01 45.4 27.6 Highest 1,038.2 1.11 46.3 30.0 Lowest 894.0 0.92 42.3 25.6 No. of analysts 17 19 6 8 *Data from Reuters Estimates (Editing by Mike Miller, Himani Sarkar)
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