* Shares up 5 pct
* Co raises annual revenue forecast
* 2nd-qtr adj profit 88 cents/shr vs est 81 (Adds analyst comment)
Aug 2(Reuters) - GPS-based gadgets maker Garmin Ltd reported a better-than-expected quarterly profit, as robust demand for devices aimed at outdoor enthusiasts helped make up for flagging sales in its automobile products business.
Shares of the company rose 4.2 percent to $52.07 in early trading on Wednesday.
Garmin, which started out as a maker of GPS devices, has benefited in recent years from soaring demand for devices such as smartwatches and other wearable devices that track everything from heart rates and calories to a pet's movement and the weather.
Research firm IDC expects worldwide shipments of wearable devices to rise about 20 percent this year and nearly double by 2021.
Sales in Garmin's outdoor business, which sells pet trackers and sports watches, jumped 46.3 percent to a record $194.8 million in the second quarter July 1, representing the seventh straight increase.
Garmin's Fenix 5 line of watches, launched in January with a $600 starting price tag, comes with heart rate monitors and mapping functions and is aimed at hikers, and skiers and sports enthusiasts.
"Garmin's outdoor segment strength is a clear indicator Apple Watch will not take all smartwatches to zero," Joseph Wittine, an analyst at Longbow Research said via email.
Apple Inc's Apple Watch has seen strong demand with sales rising 50 percent in its latest quarter.
Wittine added that smaller versions of the Fenix 5 watches were drawing in mainstream customers in addition to outdoor enthusiasts.
While demand for wearable devices has surged, Garmin has for years faced declining sales in its auto business that sells dash cams and GPS-based navigation products amid a slowdown in the personal navigation device market.
Sales in the company's auto business, still its biggest, dipped about 15 percent to $208.5 million.
Garmin's fitness device business also posted a 15 percent drop in sales amid stiff competition from makers of wearable health trackers such as Fitbit Inc.
Net income attributable to Garmin rose to $171 million, or 91 cents per share in the second quarter, from $161.1 million, or 85 cents per share, a year earlier.
On a pro-forma basis, the company earned 88 cents per share, beating analysts' average estimate of 81 cents, according to Thomson Reuters I/B/E/S.
Revenue rose slightly to $816.9 million. Analysts had expected $807.7 million.
Switzerland-based Garmin raised its annual revenue forecast to $3.04 billion from $3.02 billion. (Reporting by Laharee Chatterjee in Bengaluru; Editing by Arun Koyyur and Sai Sachin Ravikumar)