Trimble Navigation (TRMB) Misses Q1 Earnings & Revenues - Analyst Blog

Trimble Navigation’s TRMB first-quarter 2015 earnings of 24 cents missed the Zacks Consensus Estimate by 2 cents. The quarter was impacted by broad-based weakness in the majority of Trimble’s businesses.  This combined with a strengthening U.S dollar, declining oil prices and weather headwinds affected earnings.

 

Trimble Navigation Limited Inc. - Earnings Surprise | FindTheCompany

 

Revenues

Trimble’s first-quarter revenues of $582.6 million were up 3.3% sequentially but down 3.7% year over year. Revenues also missed the Zacks Consensus Estimate of $598.0 million and the company’s guided range of $590 million–$620 million.

During the quarter, the shortfall in revenues was attributed to FX deterioration ( negatively affecting the revenue by approximately 4%), combined with pliability in the E&C segment, mainly due to inclement weather and oil and gas weakness, which had an unfavorable impact of 3% to 4%. The Field Solutions segment was also soft, with agriculture showing some signs of stabilization.

Another important factor affecting revenues was an unexpected drop in geospatial sales mainly in North America. This drop was due to a combination of adverse weather conditions in the Northern and Eastern U.S. and unfavorable exchange rates. The decline is centered in the oil-producing regions and lower oil prices appear to be a factor.

Revenues by Segment

The Engineering and Construction (E&C), The Field Solutions (TFS), The Mobile Solutions (TMS) and Advanced Devices (AD) segments generated 51%, 20%, 22% and 7% of total revenue, respectively.

E&Cunit revenues of $299.3 million were down 8.9% sequentially and 3.2% year over year. In this quarter, construction was particularly affected by exchange rates, weather and regionalized secondary effects of oil price. However, management said that the oil price effects were much less severe than in geospatial.

The heavy civil component of construction continued to be negatively impacted by an average international economic environment, most particularly by Australia.

However, going forward, the company expects to regain traction by working through these issues.

TFSrevenues of $115.3 million were up 42.9% sequentially but down 16.6% year over year. The year-over-year decrease was due to weaker sales in agricultural solutions. Moreover, unfavorable currency translation led to another 5% year-over-year decline.

TMSrevenues of $128.2 million were up 3.3% sequentially and 8.1% year over year. This was the best performing segment this quarter. Going forward, the company expects this segment to perform well, largely based on the Transportation & Logistics business. Europe, both North and South, looks promising, apart from the exchange translation effects.

The AD segment was up 30.5% from the last quarter and 3.1% from the year-ago quarter to $39.8 million.

Margins

Trimble’s gross margin was 56.6%, up 80 basis points (bps) sequentially and down 91 bps year over year. The decrease was due to reduced agriculture sales and FX headwinds.

Trimble reported operating expenses of $245.6 million, up 6.9% year on year. Operating margin was 14.6%, up 153 bps sequentially and down 506 bps year over year. The impact of currency translation on company operating margins was small. A large cost base in Europe and other countries mitigated the impact on operating income.

Net Income

Pro-forma net income was $63.2 million or 24 cents compared with $88.9 million or 34 cents in the year-ago quarter. 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 presentation due to the inclusion/exclusion of some items that were not considered by management.

On a GAAP basis, Trimble recorded a net profit (for Trimble shareholders) of $34.0 million (13 cents per share) compared with $55.8 million (21 cents) in the previous quarter and $68.1 million (26 cents) in the year-ago quarter.

Balance Sheet

Trimble exited the first quarter with cash and cash equivalents of approximately $146.0 million versus $148.0 million in the prior quarter. Inventories were $276.0 million, down from $278.0 million in the last quarter. Accounts receivables were $383.0 million, up from $362.0 million in the earlier quarter. Days sales outstanding (DSOs) were up from around 58 days to 60 days.

During the quarter, the company repurchased 478,000 shares of Trimble common stock for $12.6 million.

Guidance

Management expects second-quarter revenues in the range of $570 million–$600 million. Earnings per share on a GAAP basis are expected in the range of 4–12 cents and on a non-GAAP basis within 23–30 cents. The Zacks Consensus Estimate stands at 37 cents. The calculation of non-GAAP earnings per share excludes one-time charges such as amortization of intangibles worth $40.0 million, anticipated acquisition costs of $4.0 million and stock-based compensation of $13.0 million. The GAAP tax rate is expected to be 28% while non-GAAP tax rate is likely to be 24%, while share count is projected to be 262.0 million.

Summary

Trimble reported weak first quarter 2015 results with both the top and bottom lines missing the Zacks Consensus Estimate.

Going forward, management expects the real estate and workplace solutions business, which includes Manhattan Software and E&C; and construction supply and Field Services management, which are in Mobile Solutions currently, to represent meaningful trades and produce potential future opportunities. These growth businesses are expected to demonstrate meaningful progress in 2015.

During the year, the construction supply business is expected to strengthen due to an improving economy in the U.S. and a stronger product portfolio. The Field Solutions & the Mobile Solutions segment is looking at a strong orders pipeline, which will lead to an improvement in the second half of the year and a stronger 2016.

Several strategic process -- progress that foreshadow future revenue were also taken. This includes win of Beijing new airport project, a new multiyear alliance with Paccar, the manufacturer of trucks, and its collaboration with Microsoft to develop a new generation of tools integrated with Windows HoloLens holographic platform on Windows 10.

Trimble is witnessing improving trends in the construction market. The company’s initiatives, such as lowering cost structure, strategic acquisitions, increasing adoption of technology in the agricultural market, product enhancements and international expansion appear to be encouraging.

Currently, Trimble has a Zacks Rank #3 (Hold).

However, some better-ranked stocks include PetMed Express, Inc. PETS, Groupon, Inc. GRPN and Healthstream Inc. HSTM. All of them sport a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
PETMED EXPRESS (PETS): Free Stock Analysis Report
 
TRIMBLE NAVIGAT (TRMB): Free Stock Analysis Report
 
GROUPON INC (GRPN): Free Stock Analysis Report
 
HEALTHSTREAM (HSTM): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research