Zacks_Analysts' Blog : Garmin Beefs Up Aviation Portfolio - Analyst Blog

Garmin Ltd (GRMN) announced that its satellite navigation unit, Garmin International has added a couple of panel-mount devices (GTN 650 and GTN 750) for general aviation aircraft.

Product Highlights

The GTN 650 and GTN 750 are basically enhancements over the existing GNS 430W and 530W that have been popular with customers. They add touchscreen to Garmin avionics for the first time (although some essential keys for establishment of routes and changing of COM frequencies are included) and come with more than double the screen size of their predecessors.

This helps the viewing of entire charts through Garmin FliteCharts and ChartView. The menu interface resembles that of a desktop, facilitating easy navigation and integration across select Garmin avionics and sensors.

Functional Enhancements

The physical enhancements are geared to enable Garmin’s patent-pending graphical flight planning capability. With its help, pilots can zoom in on any leg of an active flight plan, edit it directly on the map, and super-impose victor airways and high-altitude jet routes.

Additionally, since Garmin’s terrain, mapping and obstacle databases have been incorporated into the system, it is able to send out color-coded alerts in case of terrain conflicts. The output can be connected to select autopilots for automatic alteration to flight procedures.

Recent Trends in the Aviation Business

Garmin’s aviation business has underperformed since the end of 2008, mainly on account of the recession. Not only was credit harder to come by, but consumers and businesses lowered expenditure on travel.

As a result, aircraft manufacturers were hit on both counts. Garmin tried to deal with market conditions by focusing on the retrofit side of the business, which resulted in a few design wins. However, momentum in the aviation segment that has historically generated Garmin’s highest margin business, will not come until there is stronger evidence of a recovery in the market at large.

Considering the fact that air travel has picked up over the last few quarters, we may expect to see an up tick in spending on aircraft. Therefore this is a very good time to introduce new products.

Recommendation

While we remain concerned about the personal navigation device (PND) market, which generates the largest chunk of Garmin’s revenue, we think there are a number of positives for Garmin. For one, management has taken action to counter declining PND growth with in-dash solutions and navigation apps. While we maintain that reaction was slow, we can see it coming nonetheless. Additionally, management has taken measures to boost every other segment through new product launches and OEM partnerships. At this point we believe the positives and negatives balance each other. We therefore have a short-term Hold recommendation on the shares (Zacks #3 Rank).