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Why Is Trimble (TRMB) Up 3.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Trimble Navigation (TRMB - Free Report) . Shares have added about 3.8% in that time frame, outperforming 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 catalysts.

Trimble Q2 Earnings & Revenues Beat Estimates

Trimble reported second-quarter 2020 non-GAAP earnings of 52 cents per share, beating the Zacks Consensus Estimate by 40.5%. Notably, the bottom line improved 6.1% sequentially but declined 1.9% year over year.

Per management, non-GAAP revenues decreased 14.1% year over year and 7.4% on a sequential basis to $735.2 million.

Further, the company’s GAAP revenues were $733.6 million, which surpassed the Zacks Consensus Estimate of $694.6 million. However, the figure was down 14.2% from the year-ago quarter and 7.4% from the prior quarter.

The top line was impacted by weakness in the overall demand environment on account of the coronavirus pandemic. Further, sluggishness in all the segments remained a major headwind.

Product revenues (56.2% of GAAP revenues) totalled $412.4 million, down 20.8% on a year-over-year basis. Services revenues (21.3% of revenues) were $156.6 million, down10.3% year over year. Subscription revenues (22.5% of revenues) improved 3.5% from the year-ago quarter to $164.6million.

Trimble continues to anticipate persistent headwinds in the global economy owing to coronavirus pandemic. Consequently, the company has refrained from providing guidance for the third quarter and the balance of 2020.

Nevertheless, the company’s cost control strategies are expected to drive profitability in the near term. Further, the company’s acquisition strategy remains a major positive and is likely to aid the stock rebound in the long haul.

Segments in Detail

Buildings and Infrastructure: This segment generated sales of $295.3 million, accounting for 40.2% of the company’s non-GAAP revenues. The figure also decreased 13.1% on a year-over-year basis. This was due to slowdown in hardware, perpetual software license and professional services revenues. Nevertheless, the company witnessed positive contributions from Viewpoint, e-Builder and SketchUp buyouts.

Geospatial: Sales from this segment were $145.2 million, accounting for 19.7% of total revenues. The figure decreased 11.6%compared with the year-ago quarter.

Resources and Utilities: The segment generated sales of $143.8 million, accounting for 19.6% of total revenues. The figure decreased5.8% on a year-over-year basis due to slowdown in agriculture revenues in the reported quarter. Nevertheless, the company experienced growth in its utilities business during the reported quarter, which was a positive.

Transportation: Sales from this segment went down 24.1% from the year-ago quarter to $150.9 million. Notably, the figure made up20.5% of total revenues. Sluggishness in the transportation sector was a concern.

Operating Details

In the second quarter, non-GAAP gross margin came in at 58.9%, expanding 200 basis points (bps) year over year.

Adjusted operating expenses accounted for 35.8% of non-GAAP revenues, contracting 60 bps compared with the year-ago quarter.

Consequently, non-GAAP operating margin came in at 23.1%, which expanded 260 bps year over year.

Balance Sheet

At the end of second-quarter 2020, cash and cash equivalents were $196.4 million, down from $216.8 million at the end of first-quarter 2020. Inventories were $338.6 million, up from $327.2 million in the previous quarter.

Long-term debt was $1.76 billion at the end of the second quarter, compared with $1.7 billion at the end of the first quarter.

Further, the company generated $147 million of cash from operations compared with$155.7 million in the previous quarter.

Trimble generated free cash flow of $135 million in the reported quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 9.44% due to these changes.

VGM Scores

At this time, Trimble has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 trending upward for the stock, and the magnitude of these revisions looks promising. 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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