Garmin Ltd (NDAQ: GRMN) shares dropped more than 20 percent today after the company announced second quarter earnings that missed analyst expectations. The high-flying GPS maker also disappointed investors when it forecasted limited growth for the rest ofthe year and said it was delaying its entrance into the cellular phone market. Many investors are now questioning whether or not this GPS giant can be valued as a growth company in today's environment.

Garmin reported total revenues of $912 million, which is up 23% from $742 million in the second quarter of 2007. Gross margins remained solid at 45.8%, despite the economic slowdown, compared to 48.2% in the first quarter of 2008 and 50.5% in the second quarter of 2008. Operating margins were up 20 basis points sequentially to 26.2% in the first quarter, but were down compared to 32.5% in the second quarter of 2007. And finally, diluted earnings per share increased 21% in the second quarter.

"We are pleased with our financial results for the second quarter given the economic conditions facing the consumer electronics segment," said Kevin Rauckman, chief financial officer of Garmin Ltd. " We also generated $34 million of free cash flow in the second quarter of 2008, resulting in a cash and marketable securities balance of just over $1.0 billion at the end of the quarter." This number is a positive note, but not enough to convince investors...

The forecasts are where investors lost confidence. Garmin anticipates overall revenues in 2008 to hit $3.9 billion and earnings to hit $4.13 per share, including the $0.27 related to the tender of their Tele Atlas NV shares. The company also reiterated growth rates for all of its division, except for the marine segment, where it said that high fuel prices have led it to forecast flat revenues for 2008. Meanwhile, the firm also forecasted a drop in operating margins to 25% as input costs rise and selling prices lower.

Related Companies
KVH Industries, Inc. (KVHI)
Audiovoxx Corporation (VOXX)

Merrill Lynch & Co., Inc. (NYSE: MER) shares fell sharply today after the troubled investment bank priced its share offering at $22.50. This pricing point suggests that they weren't able to sell shares at the current market price and raises questions about both dilution and the company's ability to maintain its share price. Shares fell sharply before recovering to $23.90 on the news today.

Merrill Lynch told investors yesterday that it would raise $8.5 billion by selling newly issued stock despite the fact that CEO John Thain repeatedly denied that the firm would need to raise more capital. In fact, back in January Thain was quoted as saying, "We're very confident that we have the capital base now that we need to go forward in 2008." Such comments had many investors convinced that such dilution wouldn't occur anymore.

In fact, on April 4th of 2008 he even commented: "In 2007, we lost 8.6 billion dollars after tax, but we raised 12.8 billion dollars in new capital. We raised significantly more capital than we lost. And we did that on purpose so that we could say to the marketplace that we raised more than enough capital. We replaced all the capital we lost. We have plenty of capital going forward, and we don't need to come back into the equity market. The goal is to maintain our current ratings. No more capital raising; I'm sure we have enough capital."

Merrill Lynch needs the capital after unloading more than $30.6 billion in repackaged debt at a fire sale price ealier this month in an attempt to reduce the risk on its balance sheet. Such news only underscores the fact that the financial sector remains exposed to losses that will require more loan loss reserves, more write-offs, and more capital to keep afloat. All of this is bad news for Merrill Lynch and others in the financial sector, except perhaps Goldman Sachs.

Related Companies
Lehman Brothers Holdings (LEH)
Goldman Sachs Group (GS)
Morgan Stanley (MS)
UBS AG (UBS)
Citigroup Inc. (C)
Jefferies Group (JEF)

Kraft Foods Inc. (NYSE: KFT) shares surged higher today after it reported strong second quarter earnings and forecasted a strong full year. The world's second largest food-maker announced higher profits thanks to commodities hedging, successful price hikes and the dollar's decline overseas. The news comes half way through the company's three year plan to restructure itself.

Second quarter income increased 3.5 percent to $732 million from $707 million a year earlier. Excluding items, profit beat analyst estimates by 8 cents per share. Meanwhile, revenues also rose some 21 percent to $11.2 billion from $9.2 billion a year earlier. Finally, Kraft now expects to earn at least $1.92 per share in 2008, which is 2 cents higher than its previous forecast and matches analyst estimates.

Kraft earnings benefited the most from a $150 million hedge in grain, which helped it lock in prices for the commodity. Price increases helped the company recoup costs in other areas, such as cocoa, sugar and transportation. Oil prices have climbed 61 percent in the past year, while wheat used in cookies and pizza has risen 27 percent. Some consumers have switched to less expensive brands after the increases, but Kraft still holds a commanding lead in its markets.

Related Companies
Ralcorp Holdings, Inc. (RAH)
General Mills Inc. (GIS)
Sara Lee Corp. (SLE)
Kellogg Company (K)
ConAgra Foods Inc. (CAG)
PepsiCo Inc. (EPE)