Trimble (TRMB) Earnings Beat Estimates In Q3, Sales Miss

Trimble Navigation’s (NASDAQ:TRMB) third-quarter 2016 earnings of 29 cents exceeded the Zacks Consensus Estimate by a couple of cents.

Revenues

Trimble’s third-quarter revenues of $584 million were down 4.2% sequentially but up 3.9% year over year. Revenues were below the Zacks Consensus Estimate of $600.5 million and the company’s guided range of $587–$617 million.

Revenues by Segment

Engineering and Construction (E&C), The Field Solutions (TFS), The Mobile Solutions (TMS) and Advanced Devices (AD) generated 57%, 13%, 24% and 6% of total revenue, respectively.

The quarter’s E&C unit revenues of $332.4 million were up 1.8% year over year. TFS revenues of $77.9 million showed little movement and were up 6% year over year. TMS revenues of $138.5 million were up 5.2% year over year. The AD segment increased 14.6% from the year-ago period to $35.3 million.

Margins

Trimble’s pro-forma gross margin was 56.7%, up 95 basis points (bps) sequentially but down 47 bps year over year. The sequential increase was due to a favorable mix of products in some businesses.

Trimble’s adjusted operating expenses of $233.8 million decreased 8.0% sequentially but increased 1.9% year on year. Operating margin was 16.7%, up 258 bps sequentially and 31 bps year over year.

Net Income

Pro-forma net income was $73.4 million compared with $66.9 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 a net profit (for Trimble shareholders) of $39.2 million (15 cents per share) compared with $37.1 million (14 cents) a year ago.

Balance Sheet

Trimble exited the third quarter with cash and cash equivalents of approximately $275.6 million compared with $231.9 million in the prior quarter. Inventories were $224.3 million, down from $241.7 million in the last quarter. Accounts receivables were $369.2 million, down from $377.5 million in the earlier quarter.

Cash flow from operations was $282.0 million versus $192.5 million in the prior quarter.

Share Repurchase

During the quarter, Trimble repurchased approximately 0.4 million shares for $10.0 million, while $148 million still remains under the current share repurchase authorization.

Guidance

Management expects fourth-quarter revenues in the range of $562–$592 million. The Zacks Consensus Estimate stands at $595.4 million.

Earnings per share are expected within 11–16 cents on a GAAP basis and within 27–32 cents on a non-GAAP basis. The Zacks Consensus Estimate is pegged at 28 cents.

The calculation of non-GAAP earnings per share excludes the amortization of intangibles worth $34 million that includes the effect of previous acquisitions, anticipated acquisition costs of $1 million, the anticipated impact of stock-based compensation expense of $14 million and restructuring charges worth $4 million. The GAAP guidance assumes a tax rate of 28% while non-GAAP guidance assumes a tax rate of 24%.

Summary

Trimble is an OEM of GPS-based products and control systems. The company reported decent third-quarter 2016 results with bottom line surpassing the Zacks Consensus Estimate while the top line missing the same.

The company’s Mobile Solutions segment will continue to benefit from growth in Transportation and Logistics, and is likely to improve in the near future.

Trimble is watching out for trends in the E&C market to improve from the building construction, and civil engineering and construction businesses. The company’s initiatives to move down the cost structure to another framework and make strategic acquisitions, combined with the increased adoption of technology in the agricultural market, product enhancements and international expansion should also see it through the current tough environment.

Currently, Trimble has a Zacks Rank #4 (Sell). Better-ranked stocks in the industry include Ambarella (NYSE:GIG) , Broadcom Limited (NASDAQ:AVGO) and Silicon Motion Technology Corp. (NASDAQ:SIMO) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

GigPeak, Inc. delivered a positive earnings surprise of 37.50%, on average, in the trailing four quarters.

Broadcom Limited delivered a positive earnings surprise of 7.00% in the trailing four quarters.

Silicon Motion Technology Corp. delivered a positive earnings surprise of 12.85% in the trailing four quarters.

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