Trimble (TRMB) Q1 earnings and revenue beat estimates

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Trimble Inc. TRMB reported non-GAAP earnings of 73 cents per share in the first quarter of 2022, which beat Zacks’ consensus estimate by 9%. Net income improved 10.6% year over year and 17.7% sequentially.

TRMB’s revenue of $993.7 million beat Zacks’ consensus estimate by 2.9%. Additionally, the figure increased 12.1% year over year and 7.3% sequentially.

Revenue was driven by an increase in product and subscription revenue. In addition, strong momentum in the Buildings & Infrastructure, Geospatial, Resources & Utilities segments supported results. Yet supply chain challenges remained a headwind for Trimble.

In 2022, Trimble is expected to experience strong demand in end markets. However, the grim supply chain bottleneck is likely to persist.

In April, Trimble signed an agreement to divest its Time and Frequency, LOADRITE, Spectra Precision Tools and SECO accessories business to Precisional LLC, a subsidiary of The Jordan Company. The transaction is expected to be finalized in the second quarter of 2022. This sale should have a negative impact on current year revenues.

Trimble Inc. Price, Consensus and EPS Surprise

Trimble Inc. price-consensus-eps-surprise-chart | Trimble Inc. Quote

Top Line in detail

Product revenue (representing 63% of total revenue) totaled $621.6 million, up 15.2% year-over-year. Subscription revenue (21%) increased 14.2% from the year-ago quarter level to $211 million. Services revenue (16%) of $161.1 million fell 0.7% from the figure reported a year ago.

Trimble reports revenue based on four types as follows:

Hardware revenue (representing 44% of total revenue) was $435.1 million, up 11.3% year-over-year. Software revenue (19%) was $186.5 million, representing a 25.8% increase over the prior year figure. Recurring revenue (34%) increased 9.3% from the level of the quarter a year ago to $334.1 million. Revenue from professional and other services (4%) totaled $38 million, down 8.2% year over year.

Trimble operates in the following four organized segments:

Buildings and infrastructure: The segment generated revenue of $397.6 million (representing 40% of total revenue), which increased 15.9% year-over-year. Despite persistent supply chain bottlenecks, revenue growth was strong across all major software and hardware-centric companies. In addition, strong growth in subscription revenues continued to be a tailwind.

Geospatial: This segment generated revenues of $207.5 million (21% of total revenues), up 14.2% from the level of the prior year quarter. Growth was driven by continued strong demand in all major regions and end markets and growth in core surveying and mapping businesses, partially offset by supply chain issues.

Resources and utilities: This segment generated revenues of $229.9 million (23% of total revenues), up 12% from the level of the prior year quarter. Higher incomes have been attributed to healthy agricultural markets. In addition, strong growth in positioning services remained positive. Yet, segment revenues were affected by supply chain constraints.

Transportation: The segment generated revenue of $158.7 million (representing 16% of total revenue), up 1.3% year-over-year. The segment was driven by revenue growth from the subscription and corporate card businesses.

Operation details

For the first quarter, non-GAAP gross margin was 57.9%, contracting 50 basis points (bps) year-over-year.

As a percentage of revenue, adjusted EBITDA contracted 60 basis points year over year to 25.5%.

On a non-GAAP basis, operating expenses were 34.4% of revenue and contracted 40 basis points from the year-ago quarter figure.

Non-GAAP operating margin was 23.5%, down 10 basis points year-over-year.

Balance sheet and cash flow

At the end of the first quarter of 2022, cash and cash equivalents were $357.2 million, compared to $325.7 million at the end of the fourth quarter of 2021.

Accounts receivable were $655.7 million in the current quarter, compared to $624.8 million in the prior quarter.

Total debt was $1.294 billion at the end of the first quarter, compared to $1.293 billion at the end of the fourth quarter.

TRMB generated $153 million in operating cash, compared to $155.3 million in the prior quarter.

During the current quarter, Trimble generated free cash flow of $138.5 million and repurchased shares worth $104.7 million.

Orientation

For 2022, Trimble has reduced its revenue forecast from $3.95-4.05 billion to $3.80-3.88 billion taking into account recently announced divestments. Zacks’ consensus estimate for full-year revenue is pegged at $4 billion.

Trimble also reduced 2022 non-GAAP earnings per share from $2.75 to $2.95 to $2.71 to $2.86. Zacks’ consensus estimate for current-year earnings per share is set at $2.87.

Management expects its non-GAAP operating margin to be 23-23.5% for 2022.

Zacks Ranking and Stocks to Consider

Currently, Trimble has a Zacks rank #3 (Hold). Investors interested in the broader tech sector may consider stocks such as Jabil JBL, Jack Henry & Associates JKHY, and Broadcom AVGO. While Jabil currently sports a Zacks Rank #1 (Strong Buy), Jack Henry & Associates and Broadcom currently sports a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank stocks here.

Jabil gained 6.9% year on year. JBL’s long-term earnings growth rate is currently projected at 12%.

Jack Henry & Associates gained 18.6% year on year. JKHY’s long-term earnings growth rate is currently projected at 17%.

Broadcom gains 28.9% over one year. AVGO’s long-term earnings growth rate is currently projected at 15.6%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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