Garmin raises profit outlook slightly after big beat

Wed Oct 31, 2012 12:27pm EDT

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(Reuters) - Navigation device maker Garmin Ltd's (GRMN.O) quarterly profit trumped analysts' estimates, boosted by strong demand for dog-tracking and golf gadgets, but the company raised its full-year forecast only modestly as it remained cautious about Europe.

Shares of the company jumped 7 percent to $42 when the Nasdaq opened for trading on Wednesday, but later slipped to trade down 4 percent at $37.28.

The company is fighting sluggish demand for its GPS-enabled handheld navigation devices by including high-margin specialized mapping services with them.

It has also been betting on outdoor and fitness products to drive growth and reduce dependence on navigation devices as smartphones loaded with free mapping apps invade its market.

The company's third-quarter profit beat estimates by 13 cents but Garmin, known for conservative forecasts, raised its full-year profit outlook range by only 5 cents.

"This suggests that expectations for the fourth quarter might be lower than previously anticipated," said Oppenheimer & Co analyst Yair Reiner.

He, however, added it was possible the company was just being conservative about its outlook as usual.

Garmin now expects a per-share profit of $2.75 to $2.90 for the full year, up from its earlier forecast $2.70 to $2.85.

The company is expecting a drop in fourth-quarter gross margins, it said on a conference call with analysts.

Garmin added it would also spend much more on advertising in the holiday season, which might be a slight drag on fourth-quarter profit.

Revenue from the company's fitness business, which makes gadgets such as GPS-enabled watches to count calories and monitor heart beats, slipped 6 percent in the quarter ended September 29.

This was the first-ever decline in revenue since it started reporting as a separate segment in 2011.

"Part of it appears to be the difficult comparisons to 2011 when the company had strong sales and some product introductions," Oppenheimer's Reiner said.

"But I think there could be some questions raised about whether that category is beginning to face competition from smartphones and other apps."

The company's Dutch rival, TomTom NV (TOM2.AS), trimmed its full-year revenue forecast on Tuesday, citing falling sales of its car navigation devices in Europe.

Garmin's third-quarter profit fell to $140.3 million, or 72 cents per share, from $150.4 million, or 77 cents per share, a year earlier.

Excluding one-time items, the company earned 74 cents per share. Total revenue rose 1 percent to $672 million.

Analysts on average had estimated earnings of 61 cents per share on revenue of $660.9 million, according to Thomson Reuters I/B/E/S.

Sales of Garmin's outdoor products comprised 16 percent of the total revenue and were up 11 percent at $105 million.

(Reporting by Sayantani Ghosh in Bangalore; Editing by Sreejiraj Eluvangal, Maju Samuel)

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