Trimble Navigation's ( TRMB ) fourth-quarter 2014 earnings of 25 cents were in line with the Zacks Consensus Estimate. The quarter was impacted by broad-based weakness in the majority of Trimble's businesses, especially agriculture, offset by lower-than-expected operating expenses.
Trimble's fourth-quarter revenues of $563.8 million were down 5% sequentially and 5.9% year over year. Revenues missed the Zacks Consensus Estimate of $585.0 million and came in at the lower end of the company's guided range of $560-$590 million. The lower revenues were due to weak performance in all the reporting segments, especially agriculture. Also, foreign currency translation unfavorably impacted the company's revenues by approximately 2%.
Revenues by Segment
The Engineering and Construction (E&C), The Field Solutions (TFS), The Mobile Solutions (TMS) and Advanced Devices (AD) segments generated 58%, 14%, 22% and 6% of total revenue, respectively.
E&C unit revenues of $328.5 million were down 4% sequentially and 0.8% year over year. The most important markets within E&C are heavy and highway, large-scale commercial, small-scale commercial and housing as well as survey instruments.
The year-over-year decrease was due to the impact of one-time items. Excluding the impact of these one-time items, revenues were up in high single-digits driven by growth in heavy civil and building construction.
The use of advanced technology, including computerized design tools, estimating software, scheduling software, geospatial instruments, machine control and on-site alignment tools will aid the E&C business.
TFS revenues of $80.7 million were down 9.1% sequentially and 27.4% year over year. The decrease was due to weaker sales in agricultural solutions. Moreover, unfavorable currency translation led to another 2% year-over-year decline.
TMS revenues of $124.1 million were up 2.5% sequentially but down 1.4% year over year. The divestiture of a non-strategic consumer oriented business and unfavorable currency translation led to the weakness.
The AD segment was down 6.3% from the last quarter and 2.1% from the year-ago quarter to $30.5 million. The sequential decrease was due to weakness in several of its businesses.
Trimble's gross margin was 51.9%, down 230 basis points (bps) sequentially and 140 bps year over year. The decrease was due to reduced agriculture sales and unfavorable mix.
Trimble reported operating expenses of $196.5 million, down 14.5% year on year. As a percentage of sales, research & development and sales & marketing expenses increased, while general & administrative expenses decreased. As a result, the operating margin was 13.6%, up 1,170 bps sequentially and 240 bps year over year. Also, GAAP operating income benefitted from the reversal of $51.3 million reserve for legal matters related to a jury verdict that was overturned.
Pro-forma net income was $65.7 million or 25 cents compared with $105.1 million or 40 cents in the year-ago quarter. 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 presentation due to the inclusion/exclusion of some items that were not considered by management.
On a GAAP basis, Trimble recorded a net profit (for Trimble shareholders) of $55.8 million (21 cents per share) compared with $11.8 million (4 cents) in the previous quarter and $60.0 million (23 cents) in the year-ago quarter.
Trimble exited the fourth quarter with cash and cash equivalents of approximately $148.0 million versus $139.5 million in the prior quarter. Inventories were $278.1 million, slightly up from $278.0 million in the last quarter. Accounts receivables were $362.0 million, up from $358.5 million in the earlier quarter. Days sales outstanding (DSOs) were up from around 56 days to 58 days.
Trimble generated $96.6 million of cash from operations, up from $95.9 million in the previous quarter. Total debt (long-term plus short-term) at quarter-end stood at $738.4 million, up from $646.7 million in the third quarter.
Management expects first-quarter revenues in the range of $590-$620 million, while the Zacks Consensus Estimate is pegged at $618 million. Earnings per share on a GAAP basis are expected in the range of 9-16 cents and on a non-GAAP basis within 26-33 cents. The Zacks Consensus Estimate stands at 30 cents. The calculation of non-GAAP earnings per share excludes one-time charges such as amortization of intangibles worth $41.0 million, anticipated acquisition costs of $4.0 million and stock-based compensation of $13.0 million. The GAAP tax rate is expected to be 23% while non-GAAP tax rate is likely to be 22%, while share count is projected to be 264.0 million.
Trimble is witnessing improving trends in the construction market. The company's initiatives, such as lowering cost structure, strategic acquisitions, increasing adoption of technology in the agricultural market, product enhancements and international expansion appear to be encouraging.
Trimble's agriculture business, however, is seeing a slowdown and a few of its businesses are experiencing normal seasonality. Though the softness in certain areas of business is related to macro concerns and the nature of new business acquired, the weakness in the agricultural business could hamper revenue growth, going forward.
Currently, Trimble has a Zacks Rank #4 (Sell). Some stocks that have been performing well include PetMed Express, Inc. ( PETS ), Mistras Group Inc ( MG ) and GrafTech International Ltd ( GTI ). While PetMed sports a Zacks Rank #1 (Strong Buy), Mistras Group and GrafTech have a Zacks Rank #2 (Buy).
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