Garmin (GRMN 0.92%) investors have some big questions heading into the GPS-focused device maker's upcoming earnings report. Executives warned about an "increasingly complex and challenging business environment" in the company's prior outing back in late April. At the time, Garmin reported slowing growth and declining profitability. Wall Street is bracing for more of the same next week.

With that big picture in mind, let's look at three key trends to follow in Garmin's second-quarter announcement, set for Wednesday, July 27.

1. Sales in 2 core divisions suggest challenges ahead

Garmin's fiscal Q1 report contained some warning signs around demand that have investors worried heading into this week's announcement. Yes, overall sales rose 9% to set another quarterly record. But two of Garmin's five core divisions stumbled. Sales were flat in the aviation unit and dove 28% in the fitness unit that's home to its wearable devices.

Investors are bracing for more challenges in this division ahead, and that's a key reason why sales are only expected to rise by about 1% in Q2. But look for any change in management's bullish reading on the wider industry. Executives have been saying that demand is strong overall and that the fitness category will rebound in the second half of 2022. Any shift in those predictions would impact the stock next week.

2. Garmin is seeing falling margins

There has been no shortage of pressure on Garmin's earnings. Supply chain challenges, higher wages, and soaring input costs combined to push operating income down 8% last quarter. Operating margin is now at about 23% of sales after touching 27% of sales in mid-2021.

GRMN Operating Margin (TTM) Chart

GRMN Operating Margin (TTM) data by YCharts

That decline is the biggest reason for Garmin's stock price slump so far in 2022, as it feeds into fears that many of its profitability gains in earlier phases of the pandemic were only temporary. That's not the reading that management has, and in fact, executives are aiming to push margins higher again over the next few quarters in part thanks to rising prices. But investors might see another disappointing decline in the Q2 announcement.

3. Will Garmin reveal a weaker outlook?

Garmin's official 2022 outlook heading into the report is for sales to rise about 10% to $5.5 billion. Hitting that figure would mark solid gains over last year's impressive revenue result. It also reflects a steady outlook compared to early 2022, even though economic growth is slowing, inflation is spiking, and supply chain challenges are worsening.

All of those issues have Wall Street worried about a potential shift in management's tone on Wednesday. CEO Cliff Pemble might blame any number of short-term pressures, from currency exchange rate swings to inflation, as support for issuing a more conservative 2022 outlook.

Demand should still hold up well, in part because Garmin has a wide portfolio of GPS devices that spans both consumer segments and areas like aviation platforms. That diversity has helped it grow through a wide range of selling conditions over the last seven years.

Yet the stock might remain under pressure if Garmin can't show a clear path back toward expanding, or at least stabilizing operating profit margin. Continued declines here will have investors worried about the earnings picture, even though Garmin continued to demonstrate market share strength in attractive industries like smartwatches.