Trimble (TRMB) Q3 Earnings Beat Estimates, Revenues Down Y/Y

Trimble Inc. (NASDAQ:TRMB) reported third-quarter 2019 non-GAAP earnings of 48 cents per share, beating the Zacks Consensus Estimate by 1 cent. However, the figure declined 2% year over year and 17.8% sequentially.

Per management, non-GAAP revenues decreased 2.5% year over year and 8.3% on a sequential basis to $784.3 million. Moreover, the company’s GAAP revenues came in $783.9 million, down 1.4% from the prior-year quarter and 8.3% from the previous quarter.

This was primarily due to weakness in the market conditions. Moreover, sluggish performance of Resources and Utilities and Geospatial segments during the reported quarter.

Nevertheless, the company witnessed solid momentum across Buildings and Infrastructure and Transportation segments during the third quarter.

Product revenues (59% of GAAP revenues) totaled $458.8 million, down 8.2% on a year-over-year basis. Services revenues (21% of revenues) came in at $168 million, up 7.3% year over year. Subscription revenues (20% of revenues) improved 13% from the year-ago quarter to $157.1 million.

Management expects market uncertainties to continue acting as a headwind in the ongoing quarter.

Coming to price performance, shares of Trimble have gained 21.1% on a year-to-date basis, underperforming the industry’s rally of 41.9%.

However, the company remains optimistic about its cost control strategies, which are expected to aid profitability in the near term. Further, the company’s acquisitions remain a major positive and are likely to aid the stock rebound in the long haul.

Segments in Detail

Buildings and Infrastructure: This segment generated $309.8 million sales, accounting for 39.5% of the company’s non-GAAP revenues, improving 4.7% on a year-over-year basis. Notably, strong performance by civil construction businesses drove year-over-year sales in this segment. Further, positive contributions from e-Builder and Viewpoint buyouts contributed to the results. The company also experienced robust growth in software business. Moreover, the segment experienced solid momentum in North America and Europe during the third quarter.

Geospatial: Sales from this segment were $155.1 million, accounting for 19.8% of total revenues. The figure decreased 16.3%,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. Additionally, sluggish performance of this segment in North America remains a headwind.

Resources and Utilities: The segment generated sales of $121.1 million, accounting for 15.4% of total revenues. The figure declined 9.1% on a year-over-year basis. The segment witnessed weak performance in North America in the third quarter. Further, the ongoing U.S.-China trade tensions resulted in sluggish spending by U.S. farmers, which in turn led to a weakened U.S. agriculture market. This also impacted the top-line within this segment.

Transportation: Sales from this segment went up 4.2% from the year-ago quarter to $198.3 million, accounting for 25.3% of total revenues. Strong momentum of the segment across North America and Europe contributed to the results. However, the company was hurt by rising spending related to ELD conversion.

Operating Details

In the third quarter, non-GAAP gross margin came in at 57%, contracting 90 bps year over year owing to unfavorable revenue mix.

Adjusted operating expenses accounted for 36.4% of non-GAAP revenues, contracting 70 bps compared with the year-ago quarter.

Further, non-GAAP operating margin came in at 20.7%, which contracted 10 bps year over year.

Balance Sheet

As of Sep 27, 2019, cash and cash equivalents were $184.6 million, down from $199.6 million as of Jun 28, 2019. Inventories were $290.1 million, up from $287.9 million in the previous quarter.

Long-term debt was $1.514 billion at the end of the third quarter, compared with $1.513 billion at the end of the second quarter.

Further, the company generated $137 million of cash from operations and $121 million of free cash flow during the reported quarter.

Additionally, the company repurchased shares worth $121 million in the third quarter.

Guidance

For fourth-quarter 2019, Trimble anticipates non-GAAP earnings between 46 cents and 50 cents per share. The Zacks Consensus Estimate for earnings is pegged at 50 cents.

The company expects GAAP revenues between $768 million and $798 million. Further, it anticipates non-GAAP revenues between $770 million and $798 million. The Zacks Consensus Estimate for revenues is projected at $818.93 million.

For 2019, management anticipates non-GAAP earnings between $1.91 and $1.95 per share. The Zacks Consensus Estimate for earnings is pegged at $1.95.

The company revised the guidance for non-GAAP revenues downward from $3.255 billion- $3.315 billion to $3.215 billion-$3.245 billion. Further, guided range for GAAP revenues moved south from $3.251 billion-$3.311 billion to $3.209 billion-$3.239 billion. The Zacks Consensus Estimate for revenues is projected at $3.28 billion.

Zacks Rank & Key Picks

Trimble currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are NetEase, Inc. (NASDAQ:NTES) , Itron, Inc. (NASDAQ:ITRI) and Five9, Inc. (NASDAQ:FIVN) . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for NetEase, Itron and Five9 is currently pegged at 31.93%, 25 and 10%, respectively.

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