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Trimble (TRMB) Up 0.2% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Trimble Navigation (TRMB). Shares have added about 0.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Trimble due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Trimble’s Q4 Earnings Top Estimates, Revenues Up Y/Y

Trimble  delivered fourth-quarter 2018 non-GAAP earnings of 48 cents per share, surpassing the Zacks Consensus Estimate by 2 cents. The figure also increased 29.7% on a year-over-year basis but decreased 2% sequentially.

Per the company, non-GAAP revenues increased 13% year over year but declined 1.5% on a sequential basis to $792.9 million. Moreover, the company’s GAAP revenues came in $785.5 million, up 12% from the prior year quarter but down 1.2% from the previous quarter.

Well-performing segments drove year-over-year top-line growth in the reported quarter. Further, positive contributions from acquisitions of e-Builder and Viewpoint contributed well throughout the reported quarter.

Product revenues (60% of GAAP revenues) came in $471.4million, up 2.6% on a year-over-year basis. Services revenues (21.3% of revenues) came in $167.3 million, up 26.2% year over year. Subscription revenues (18.7% of revenues) increased 36.2% from the year-ago quarter to $146.8 million.

Segments in Detail

Buildings and Infrastructure: This segment generated $287 million sales, accounting for 36.2% of the company’s non-GAAP revenues, growing 39.9% on a year-over-year basis. The company witnessed organic growth of 7% within this segment. Notably, strengthening BIM-centric building construction businesses drove year-over-year sales. Further, robust distribution network and expanding product portfolio are major positives.

Geospatial: Sales from this segment were $178.8 million, accounting for 22.6% of total revenues. The figure increased 2.2%, compared with the year-ago quarter. This can be attributed to strong end-user demand. Further, the segment witnessed organic growth of 3% in the reported quarter.

Resources and Utilities: The segment generated sales of $130.1 million, accounting for 16.4% of total revenues. The figure was down 1.7% on a year-over-year basis which was primarily owing to sluggish end-user business. This segment also remained flat organically. However, the company experienced strong performance of its OEM-based business.

Transportation: Sales from this segment went up 4.4% to $197 million, accounting for 24.8% of total revenues. Strong subscription revenues drove the sales within this segment. Further, this segment witnessed organic growth of 4% in the quarter under review.

Operating Details

In the fourth quarter, non-GAAP gross margin came in at 59.5%, expanding 420 basis points (bps) year over year. The increase can be attributed to favorable product mix and strong cost control strategies.

Adjusted operating expenses accounted for 37.8% of non-GAAP revenues, contracting 30 bps compared with the year-ago quarter.

Non-GAAP operating margin came in at 21.7%, expanding 460 bps year over year, driven by effective operating expense management across all the segments.

Balance Sheet & Cash Flow

As of Dec 31, 2018, cash and cash equivalents were $172.5 million, down from $205.4 million as of Sep 30, 2018. Inventories were $298 million, increasing from $286.3 million in the previous quarter.

Long-term debt was $1.71 billion at the end of fourth quarter, compared with $1.79 billion at the end of the third quarter.

Cash flow from operations was $102 million in the reported quarter, declining from $117 million in the last reported quarter.

Additionally, the company repurchased 1.1 million shares worth $40 million.

Guidance

For first-quarter 2018, Trimble expects non-GAAP earnings between 44 cents and 48 cents per share.

The company expects non-GAAP revenues between $795 million and $820 million. Further, GAAP revenues are anticipated to lie within the range of $792 million to $817 million.

Note: The EPS data mentioned in the text of this section differs from the rest of report due to the difference in calculation or consideration of one-time items.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.24% due to these changes.

VGM Scores

At this time, Trimble has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Trimble has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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