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Trimble (TRMB) Up 0.9% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Trimble Navigation (TRMB). Shares have added about 0.9% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

Trimble Q1 Earnings Beat Estimates

Trimble reported first-quarter 2023 non-GAAP earnings of 72 cents per share, which surpassed the Zacks Consensus Estimate by 7.5%. However, the bottom line decreased 1% from the year-ago quarter’s figure.

TRMB’s revenues of $915.4 million missed the Zacks Consensus Estimate by 2.1%. Also, the figure was down 8% year over year.

The top-line decrease was attributed to weak momentum across Resource and Utilities, Geospatial, and Transportation segments.

Macroeconomic headwinds and supply-chain constraints also remained overhangs.

TRMB generated annualized recurring revenues of $1.65 billion in the reported quarter, which increased 12% on a year-over-year basis.

Top Line in Detail

Product revenues (accounting for 47.5% of total revenues) totaled $434.4 million, down 23% on a year-over-year basis. Subscription and services revenues (52.5%) increased 13% from the year-ago quarter’s level to $481 million.

Trimble operates under the following four organized segments:

Buildings and Infrastructure: The segment generated revenues of $399.5 million (accounting for 43.6% of total revenues), which fell 0.5% year over year.

Geospatial: This segment generated revenues of $152.4 million (16.6% of total revenues), which fell 27% from the prior-year quarter’s level. The segment was affected as dealers moderated inventory levels.

Resources and Utilities: This segment generated revenues of $208.6 million (22.8% of total revenues), down 9% from the prior-year quarter’s level. Lower revenues were attributed to weak agricultural revenues.

Transportation: The segment generated revenues of $154.9 million (accounting for 16.9% of total revenues), which dropped 2% on a year-over-year basis.

Operating Details

For the first quarter, the non-GAAP gross margin came in at 64.2%, expanding 630 basis points (bps) year over year.

On a non-GAAP basis, operating expenses accounted for 39.5% of revenues and expanded 510 bps from the year-ago quarter’s figure.

Non-GAAP operating margin came in at 24.7%, which expanded 120 bps year over year.

Balance Sheet

At the end of first-quarter 2023, cash and cash equivalents were $1.04 billion, up from $271 million at the end of fourth-quarter 2022.

Accounts receivables were $578.8 million in the reported quarter, falling from $643.3 million in the prior quarter.

Total debt was $2.09 billion at first-quarter end compared with $1.52 billion at fourth-quarter end.

Guidance

For second-quarter 2023, Trimble expects revenues between $962 million and $992 million.

The company expects non-GAAP earnings per share between 55 cents and 61 cents.

For 2023, Trimble expects revenues between $3.835 billion and $3.935 billion.

Trimble anticipates 2023 non-GAAP earnings per share within $2.52-$2.72.

Management expects non-GAAP tax rate between 17.5% and 18% for 2023.

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -10.85% due to these changes.

VGM Scores

At this time, Trimble has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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.

Performance of an Industry Player

Trimble belongs to the Zacks Electronics - Miscellaneous Products industry. Another stock from the same industry, KLA (KLAC), has gained 21.3% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.

KLA reported revenues of $2.43 billion in the last reported quarter, representing a year-over-year change of +6.3%. EPS of $5.49 for the same period compares with $5.13 a year ago.

KLA is expected to post earnings of $4.82 per share for the current quarter, representing a year-over-year change of -17%. Over the last 30 days, the Zacks Consensus Estimate has changed +1%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for KLA. Also, the stock has a VGM Score of C.

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