Trimble Navigation Limited (TRMB)is slated to report third-quarter 2014 results on Oct 30. In the last-reported quarter, Trimble recorded a positive earnings surprise of 10.81%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Trimble reported strong second-quarter 2014 earnings of 42 cents per share, beating the Zacks Consensus Estimate by 5 cents. The increase in profitability was driven by broad-based growth in all except the agriculture business. Also, higher gross margins and solid execution aided earnings growth in the quarter.
Management’s initiatives, such as lowering the cost structure, strategic acquisitions, product enhancements and international expansion appear to be paying off.
However, quite a significant portion of its business, whether directly or indirectly, is dependent on government spending in the U.S. Though the softness in certain areas of the business is related to macro concerns and the nature of new business acquired, 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 38 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 34 cents. Hence, the difference is 0.00%.
Zacks Rank: Trimble currently has a Zacks Rank #3 (Hold). Though Zacks Ranks #1, 2 or 3 increase the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Ranks #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:
InvenSense (INVN) has an Earnings ESP of +10.00% and a Zacks Rank #2(Buy)
TE Connectivity Ltd. (TEL) has an Earnings ESP of +2.13% and a Zacks Rank #3
Mercadolibre, Inc. (MELI) has an Earnings ESP of +6.25% and a Zacks Rank #3
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