Trimble Navigation Limited (TRMB) is slated to report fourth-quarter 2014 results on Feb 10. In the last reported quarter, Trimble recorded a negative earnings surprise of 11.76%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Trimble Navigation’s third-quarter 2014 earnings of 30 cents missed the Zacks Consensus Estimate by 4 cents. The decrease in profitability was due to broad-based weakness across a majority of Trimble’s businesses, particularly the agriculture business. Also, lower gross margins and higher expenses impacted earnings growth in the quarter.
Its third-quarter revenues of $584.8 million were down 8.9% sequentially but up 5.1% year over year. However, third-quarter revenues were below the company’s guided range of $590 million–$600 million and also missed the Zacks Consensus Estimate of $604.0 million. The lower revenues were due to weak performance in all the reporting segments, especially the agriculture business.
Trimble is witnessing improving trends in the domestic construction market. The company’s initiatives such as lowering the cost structure, strategic acquisitions, product enhancements and international expansion appear to be encouraging.
However, its agriculture business is seeing a slowdown and a few of its businesses are experiencing normal seasonality. Though the softness in certain areas of the business is related to macro concerns and the nature of new business acquired, the weakness in the agricultural business could hamper revenue growth and profit margins, going forward.
Nevertheless, improving trends in the domestic construction market and increasing adoption of technology in the agricultural market remain secular growth drivers.
The Zacks Consensus Estimate for earnings is pegged at 25 cents.
Earnings Whispers
Our proven model does not conclusively show that Trimble is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 25 cents. Hence, the difference is 0.00%.
Zacks Rank: Trimble currently has a Zacks Rank #3 (Hold). We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat:
Ellie Mae, Inc. (ELLI) has an Earnings ESP of +40.00% and a Zacks Rank #3 (Hold).
GrubHub Inc. (GRUB) has an Earnings ESP of +9.09% and a Zacks Rank #3.
Twitter, Inc. (TWTR) with an Earnings ESP of +4.76% and a Zacks Rank #3.
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