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Trimble (TRMB) Down 39.8% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Trimble Navigation (TRMB - Free Report) . Shares have lost about 39.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Trimble due for a breakout? 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 Q4 Earnings & Revenues Beat Estimates

Trimble reported fourth-quarter 2019 non-GAAP earnings of 53 cents per share, beating the Zacks Consensus Estimate by 12.8%. The bottom line also improved 10.4% year over year and sequentially.

Per management, non-GAAP revenues increased 4.3% year over year and 5.4% on a sequential basis to $826.7 million.

Further, the company’s GAAP revenues came in $824 million, up 4.9% from the prior-year quarter and 5.1% from the prior quarter. Moreover, figure surpassed the Zacks Consensus Estimate of $785.6 million.

The top line was driven by solid momentum across Buildings and Infrastructure, Resources and Utilities and Transportation segments.

Additionally, the reported quarter was a 14-week one compared to the year-ago quarter, which was a 13-week one. Thereby, this acted as a tailwind for the company.

Product revenues (56.6% of GAAP revenues) totaled $466.5 million, down 1% on a year-over-year basis. Services revenues (22.4% of revenues) came in at $184.4 million, up 10.2% year over year. Subscription revenues (21% of revenues) improved 17.9% from the year-ago quarter to $173.1 million.

Trimble continues to anticipate persistent headwinds in its agriculture business due to tariff imposition. Further, the company expects to face delays in China-based supply chain, and its momentum across Chinese customers is likely to weaken in first-quarter 2020 owing to the outbreak of coronavirus.

Nevertheless, the company remains optimistic regarding cost control strategies, which are expected to aid 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 $313.8 million, accounting for 38% of the company’s non-GAAP revenues, improving 9.3% on a year-over-year basis. Notably, strong performance by civil construction and building businesses drove year-over-year sales in this segment. Further, positive contributions from e-Builder and Viewpoint buyouts contributed to the segment’s top line. Moreover, the company witnessed the positive impact of a 14-week quarter.

Geospatial: Sales from this segment were $168.7 million, accounting for 20.4% of total revenues. The figure decreased 5.6%, compared with the year-ago quarter primarily owing to the U.S.-China trade war. Further, macro-economic headwinds in China led to slowdown in OEM demand, which affected the segment’s top line in the reported quarter.

Resources and Utilities: The segment generated sales of $138.1 million, accounting for 16.7% of total revenues. The figure increased 6.1% on a year-over-year basis. Positive contributions from Cityworks buyout drove the segment’s fourth-quarter top line.

Transportation: Sales from this segment went up 4.6% from the year-ago quarter to $206.1 million, accounting for 24.9% of total revenues. Advantages of 14-week quarter contributed 4% to the segment’s top line.

Operating Details

In the fourth quarter, non-GAAP gross margin came in at 59%, contracting 50 basis points (bps) year over year.

Adjusted operating expenses accounted for 37.5% of non-GAAP revenues, contracting 30 bps compared with the year-ago quarter.

Further, non-GAAP operating margin came in at 21.6%, which contracted 10 bps year over year.

Balance Sheet

At the end of fourth-quarter 2019, cash and cash equivalents were $189.2 million, up from $184.6 million at the end of prior quarter. Inventories were $312.1 million, up from $290.1 million in the previous quarter.

Long-term debt was $1.6 billion at the end of the fourth quarter, compared with $1.5 billion at the end of the third quarter.

Further, the company generated $122 million of cash from operations and $108 million of free cash flow during the reported quarter.

Guidance

For first-quarter 2020, Trimble anticipates non-GAAP earnings between 40 cents and 45 cents per share.

The company expects GAAP revenues between $778 million and $808 million.

Further, the company anticipates non-GAAP revenues between $780 million and $810 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -17.81% due to these changes.

VGM Scores

At this time, Trimble has a nice Growth Score of B, though it is lagging a bit 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.

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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