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

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It has been about a month since the last earnings report for Trimble (TRMB - Free Report) . Shares have added about 3.6% 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 delivered second-quarter 2018 non-GAAP earnings of 50 cents per share, which surpassed the Zacks Consensus Estimate by 5 cents. The figure also increased 31.6% on a year-over-year basis and 13.6% sequentially.

Revenues increased 19% year over year and 5.8% on a sequential basis to $785.5 million. Moreover, the figure outpaced the Zacks Consensus Estimate of $772 million.

Growth in revenues was driven by strong performance of segments. Further, the company witnessed robust organic growth of 12%. Moreover, acquisitions contributed 5% to top-line growth.

Product revenues (67.6% of revenues) came in $531 million, up 19.2% on a year-over-year basis and 6.7% sequentially. Services revenues (17.3% of revenues) came in $136.1 million, up 21.6% year over year and 5.7% on a sequential basis. Subscription revenues (15.1% of revenues) increased 15.4% from the year-ago quarter and 2.4% sequentially to $118.4 million.

In the second quarter, Trimble’s solutions portfolio expanded with the launch of non-revenue water (NRW) solution, advanced 4G LTE Wireless Data Recorders, TSC7 Controller — a new field solution and Forensics SX10 Solution.

Last month, the company completed the acquisition of Viewpoint. The deal will add strength to the company’s Buildings and Infrastructure segment.

Moreover, the company continues to witness strong performance by the combination of e-Builder, Viewpoint and existing Trimble construction software.

Segments in Detail

Trimble operates in four organized segments: Buildings and Infrastructure, Geospatial, Resources and Utilities and Transportation segments.

Buildings and Infrastructure: This segment generated $274.3 million sales, accounting for 34.9% of the total revenues, growing 24.3% on a year-over-year basis. The company witnessed organic growth of 15% within this segment. Notably, benefits from acquisitions of e-Builder accelerated sales in this segment. Further, migration of SketchUp to a SaaS business model remained positive throughout the quarter.

Geospatial: Sales from this segment were $184.4 million, accounting for 23.5% of total revenues. The figure increased 12%, compared with the year-ago quarter. The segment witnesses 10% organic growth in the reported quarter.

Resources and Utilities: The segment generated sales of $145 million, accounting for 18.5% of total revenues. The figure was up 29.9% on a year-over-year basis. This segment also grew 10% organically. Growth in this segment was driven by the company’s improving performance in agriculture market. Moreover, the geographical diversity in Trimble’s agricultural business, especially outside of the United States remained positive.

Transportation: Sales from this segment went up 11.5% to $181.8 million, accounting for 23.1% of total revenues. The company experienced positive contributions from ALK Technologies, which contributed well to the results of this segment. Nevertheless, this segment witnessed 10% organic growth during the second quarter.

Operating Details

In the second quarter, gross margin came in at 57.1%, expanding 180 basis points (bps) year over year. The increase was attributed to favorable product mix.

Operating expenses were 36.7% of revenues, contracting 80 bps compared with the year-ago quarter.

Operating margin came in at 20.4%, expanding 260 bps year over year, driven by strong organic growth.

Balance Sheet & Cash Flow

As of Jun 30, 2018, cash and cash equivalents were $571 million, increasing from $274.5 million as of Mar 31, 2018. Inventories were $282.4 million, decreasing from $289.1 million in the previous quarter.

Long-term debt was $1.29 billion at the end of second quarter, compared with $691.8 million at the end of the first quarter.

Cash flow from operations was $185 million in the reported quarter, surging 24% from the prior-year quarter.

Guidance

For third-quarter 2018, Trimble expects non-GAAP earnings between 43 cents and 47 cents per share.

The company expects non-GAAP revenues between $795 million and $825 million.

For 2018, Trimble anticipates non-GAAP revenues to lie within the range of $3.14-3.19 billion and non-GAAP earnings between $1.81 and $1.89 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Trimble has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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.

Our style scores indicate that the stock is more suitable for growth investors than momentum investors.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, 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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