Update: Trimble Navigation Q2 2014 Earnings

Aug. 9.14 | About: Trimble Navigation (TRMB)

Summary

After its share price dropped 20% from a June high of $38.99, Trimble reported beats on 2nd quarter revenue and EPS on August 5th.

The revenue beat and EPS beat were larger than expected, even by Trimble management.

However, as expected, there is more than revenue and EPS to draw investors' attention.

Trimble Navigation (NASDAQ:TRMB) reported second quarter earnings for 2014 on August 5th. While the release still cited an impact from the U.S. agricultural industry, the information was expected and already priced into the stock (see details here). Other than that one expected hiccup, Trimble delivered an upbeat quarter exceeding management's previous guidance.

In the article referenced above, three areas were highlighted as markers for Trimble's progress and success - total revenue, Field Solutions segment revenue and non-GAAP diluted net income as a percentage of total revenue. Here's how Trimble delivered:

  • The total revenue of $642.2 million represented an 11% year-over-year increase compared to the second quarter of 2013 and a 6.2% sequential increase over the first quarter of 2014. The 6.2% increase is the largest sequential quarterly revenue increase from the first quarter to the second quarter of the past five years. The total also exceeded the high end of management's guidance from the first quarter by $12.2 million or 1.9%. Management cited the source of the revenue growth as being organic which is also positive.
  • Field Solutions revenue (the segment reflecting the majority of the impact from agriculture) was $114.5 million. While the number was a year-over-year decrease of 1%, the sequential quarterly decline was less than the one experienced in 2013 of 6%. As well, the total exceeded the past three quarters' average by 5%.
  • In its June investor presentation, Trimble included expectations of leveraging operating expenses to increase margins. Non-GAAP diluted net income as a percentage of total revenue was 18.81%. That rate exceeded the annual high of 18.02% of 2013. As a result, non-GAAP EPS were $0.45, $0.05 or 12.5% more than analyst expectations and $0.03 or 7% more than the high end of management's guidance.

In the midst of all the good news, it's not as if Trimble purposely ignored its challenges. The second quarter press release included guarded language about the ongoing challenges in the agriculture industry. While Trimble is finding itself relying less on the revenue from that industry, it still expects significant long-term growth from it due to technology innovations. As is already evident in the engineering and construction segment, those embracing technology innovations are capturing market share.

Trimble Navigation is navigating in directions worthy of notice. Don't look away now.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I plan to recommend TRMB to my investment club at the August meeting.