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Trimble (TRMB) Q2 Earnings Miss Estimates, Revenues Up Y/Y

Zacks Equity Research

Trimble Inc. TRMB reported second-quarter 2019 non-GAAP earnings of 53 cents per share, missing the Zacks Consensus Estimate by 1 cent. However, the figure improved 3.9% year over year and 17.8% sequentially.

Per management, non-GAAP revenues increased 8.4% year over year and 6.4% on a sequential basis to $855.8 million. Moreover, the company’s GAAP revenues came in $854.8 million, up 8.8% from the prior-year quarter and 6.6% from the previous quarter.

This was primarily driven by strong performance of transportation, and buildings and infrastructures segments during the reported quarter. Additionally, strategic acquisitions contributed 7% to the top line.

Product revenues (61% of GAAP revenues) totaled $521.1 million, down 1.9% on a year-over-year basis. Services revenues (20.4% of revenues) came in at $174.6 million, up 28.3% year over year. Subscription revenues (18.6% of revenues) increased 34.4% from the year-ago quarter to $159.1 million.

We note that shares of the company have plunged 10% since its earnings release, which can be attributed to weak outlook for third-quarter 2019 and full year.

During second quarter, the U.S.-China trade tensions affected U.S. farmers’ investment, which in turn impacted the company’s agriculture business, part of its resources and utilities segment. Further, Brexit continued to hinder new investments in European plant and infrastructure.

All these macro headwinds are expected to prevail in the second half of the year, which compelled the company to provide weak guidance.

Coming to price performance, the shares of Trimble have gained 14% on a year-to-date basis, underperforming the industry’s rally of 31.9%.

We note that the company’s acquisition strength remains a major positive and is likely to aid the stock to rebound in the long haul.



Segments in Detail

Buildings and Infrastructure: This segment generated $339.9 million sales, accounting for 39.7% of the company’s non-GAAP revenues, improving 22.4% on a year-over-year basis. Notably, strong performance by building and civil construction businesses of the company drove year-over-year sales in this segment. Further, continued benefits from e-Builder and Viewpoint buyouts contributed to the result. Moreover, the segment experienced solid momentum in North America and Europe during the second quarter.

Geospatial: Sales from this segment were $164.4 million, accounting for 19.2% of total revenues. The figure decreased 10.8%, compared with the year-ago quarter primarily owing to trade tensions between the United States and China. Further, macro-economic headwinds in China led to slowdown in OEM demand, which affected the segment’s top line.

Resources and Utilities: The segment generated sales of $152.7 million, accounting for 17.8% of total revenues. The figure improved 5.1% on a year-over-year basis. This segment witnessed strong growth in agriculture in Europe during the reported quarter. However, ongoing trade dispute between the United States and China resulted in sluggish spending by U.S. farmers, which in turn led to a weakened U.S. agriculture market. Further, adverse effects of drought in Brazil and Australia negatively impacted the company’s agriculture business.

Transportation: Sales from this segment went up 9.3% from the year-ago quarter to $198.8 million, accounting for 23.3% of total revenues. Robust performance by Trimble’s transportation portfolio remained positive. Further, strong momentum of the segment across North America and Europe contributed to the result.

Trimble Inc. Price, Consensus and EPS Surprise

 

Trimble Inc. Price, Consensus and EPS Surprise

Trimble Inc. price-consensus-eps-surprise-chart | Trimble Inc. Quote


Operating Details

In the second quarter, non-GAAP gross margin came in at 56.9%, contracting 40 bps year over year owing to unfavorable revenue mix.

Adjusted operating expenses accounted for 36.5% of non-GAAP revenues, contracting 10 bps compared with the year-ago quarter.

Further, non-GAAP operating margin came in at 20.4%, which contracted 30 bps year over year.

Balance Sheet

As of Jun 28, 2019, cash and cash equivalents were $199.6 million, down from $216.7 million as of Mar 30, 2019. Inventories were $287.9 million, declining from $303.7 million in the previous quarter.

Long-term debt was $1.51 billion at the end of the second quarter, compared with $1.65 billion at the end of the first quarter.

Additionally, the company repurchased shares worth $59 million in the reported quarter.

Guidance

For third-quarter 2019, Trimble anticipates non-GAAP earnings between 45 cents and 49 cents per share. The Zacks Consensus Estimate for earnings is pegged at 52 cents.

The company expects both GAAP and non-GAAP revenues between $789 million and $819 million. The Zacks Consensus Estimate for revenues is projected at $818.11 million.

For 2019, management anticipates non-GAAP earnings between $1.91 and $1.99 per share. The Zacks Consensus Estimate for earnings is pegged at $2.06 cents per share.

The company expects non-GAAP revenues between $3.255 billion and $3.315 billion. Further, GAAP revenues are anticipated to lie within the range of $$3.251 billion to $3.311 billion. The Zacks Consensus Estimate for revenues is projected at $3.32 billion.

Zacks Rank & Key Picks

Trimble currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Rosetta Stone RST, Oracle ORCL and CACI International CACI. While Rosetta Stone sports a Zacks Rank #1 (Strong Buy), Oracle and CACI carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Rosetta Stone, Oracle and CACI is currently projected to be 12.5%, 9.8% and 10%, respectively.

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