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Trimble (TRMB) Up 3.6% Since Earnings Report: Can It Continue?

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More than a month has gone by since the last earnings report for Trimble Navigation Ltd. (TRMB - Free Report) . Shares have added about 3.6% in that time frame, outperforming the market.

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

Trimble Navigation Beats on Q2 Earnings and Revenues

Trimble Navigation’s second-quarter 2017 earnings of 33 cents exceeded the Zacks Consensus Estimate by 2 cents. Also, earnings increased 26.9% year over year.

Revenues

Trimble’s second-quarter revenues of $662 million increased 7.8% sequentially and 8.6% year over year. Revenues came in above the Zacks Consensus Estimate of $641 million and also the company’s guided range of $625–$655 million.

Revenues by Segment

In the beginning of first-quarter 2017, the company changed its reporting segments. The results are based on these four new segments, namely Buildings and Infrastructure, Geospatial, Resources and Utilities and Transportation segments.

The quarter’s Buildings and Infrastructure revenues of $222.7 million increased 9.8% year over year. Geospatial revenues of $165.3 million increased 0.9% year over year. Resources and Utilities segment revenues increased 12.1% from the year-ago period to $111.0 million, while Transportation revenues were $162.9 million, reflecting an increase of 13.2% year over year.

Margins

Trimble’s pro forma gross margin was 55.7%, down 20 basis points (bps) year over year. The sequential decrease was due to an unfavorable mix of products in some businesses.

Trimble’s adjusted operating expenses of $247.7 million increased 2.4% year over year. Operating margin was 18.3%, up 210 bps year over year.

Net Income

Pro forma net income was $84.8 million compared with $66.0 million in the year-ago quarter.

The pro forma estimate excludes restructuring charges, amortization of intangibles, gain on an equity sale, litigation charges, acquisition-related costs and other adjustments on a tax-adjusted basis, but includes stock-based compensation. Our pro forma estimate may not match management’s calculation as we included or excluded certain items that were not considered by the company while presenting the results.

On a GAAP basis, Trimble recorded net profit (for Trimble shareholders) of $49.9 million (19 cents per share) compared with $35.7 million (14 cents) a year ago.

Balance Sheet

Trimble exited the second quarter with cash and cash equivalents of approximately $486.1 million compared with $422.6 million in the prior quarter. Inventories were $223.3 million, increasing from $221.1 million in the last quarter. Accounts receivables were $395.3 million, up from $394.7 million in the previous quarter.

Cash flow from operations was $145.8 million against $102.9 million in the prior quarter.

Guidance

Management expects third-quarter revenues in the range of $645–$675 million. The Zacks Consensus Estimate stands at $620.0 million.

Earnings per share are expected within 16–20 cents on a GAAP basis and within 34–38 cents on a non-GAAP basis. The Zacks Consensus Estimate is pegged at 31 cents.

The calculation of non-GAAP earnings per share excludes the amortization of intangibles worth $37 million that includes the effect of previous acquisitions, anticipated acquisition costs of $3 million, the anticipated impact of stock-based compensation expense of $15 million and restructuring charges worth $3 million. Both the GAAP guidance and the non-GAAP guidance assume a tax rate of 23%.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

VGM Scores

At this time, the stock has a nice Growth Score of B, while its Momentum is lagging a bit with a D. Also, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is solely suitable for growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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