Trimble Inc: September Slide Puts Tech Stock in Better Range Following Record Q2 Results

Trimble Stock Up 81% Year-Over-Year & Still Has Room to Run

Shares of Trimble Inc (NASDAQ:TRMB) have been experiencing a great, market-trouncing year. As of this writing, TRMB stock is up by 30% year-to-date and 81% year-over-year. That far outstrips the S&P 500, which is only up by 18% year-to-date and 33% year-over-year.

Despite its strong gains, Trimble stock is trading where it was at the start of August, having lost 10% of its value since hitting a record high at the end of that month.

The sell-off had nothing to do with Trimble’s business performance. It was in spite of all the good things happening at the company.

In early August, Trimble Inc reported record second-quarter financial results and raised its guidance again. The company also recently launched a new share repurchase program. Again, despite this encouraging news, TRMB stock’s price has been stumbling.

The short-term reversal has more to do with rising bond yields, which suggests that investors are feeling more confident about the economic recovery.

Higher bond yields negatively impact the relative value of future earnings.

The higher bond yields have come at a time when growth stocks have enjoyed a strong run. Over the last year, the Nasdaq has climbed by 20%, versus 15.6% by the Dow Jones Industrial Average. Since the start of July, the Nasdaq has gone up by three percent, compared to just 0.86% by the Dow Jones.

It’s fair to say that investors are taking some profits.

That sell-off will be short-lived, though. Bond yields might be rising, but it’s not as if technology stocks aren’t still going to power the stock market higher over the coming quarters and decades.

Moreover, 5G technology is still in its infancy, so any tech stock riding those tailwinds should continue to do well. That includes stocks of companies that take advantage of the growing number of 5G connections, like Trimble Inc.

Chart courtesy of StockCharts.com

About TRMB Stock

Sunnyvale, CA-based Trimble develops technology that helps professionals and field mobile workers connect the physical and digital worlds.

It operates through four segments: Buildings & Infrastructure, Geospatial, Resources & Utilities, and Transportation. (Source: “Investor Presentation: August 2021,” Trimble Inc, last accessed September 28, 2021.)

Buildings & Infrastructure is the company’s largest segment. It offers:

• Field and office software for route selection and design
• Systems to guide and control construction equipment
• Systems to monitor, track, and manage assets, equipment, and workers
• Software to share and communicate data

Trimble Inc’s Geospatial segment provides surveying and geospatial products, as well as geographic information systems that are used by engineers, geographic information system companies, governments, utilities, civil and rail authorities, and many more sectors around the world.

The Resources & Utilities segment offers precision agriculture products and services, such as guidance and positioning systems; automated and variable-rate application and technology systems; and information management solutions.

Trimble Inc’s Transportation segment provides:

• Solutions for long-haul trucking and freight shipper markets
• Mobility solutions, including route management, safety and compliance, end-to-end vehicle management, video intelligence, and supply chain communications
• Fleet and transportation management systems, analytics, routing, mapping, reporting, and predictive modeling solutions

Trimble Inc has more than 1,000 unique patents and invests more than $475.0 million a year in research and development. It also has an aggressive acquisition strategy, having acquired 30+ companies since 1999. Moreover, the company has millions of customers and partners in over 100 countries.

Trimble Inc Launches Venture Fund

Trimble has expanded its operations and long-term growth prospects through the creation of Trimble Ventures, a $200.0-million venture fund. (Source: “Trimble Launches $200 Million Venture Fund,” Trimble Inc, August 4, 2021.)

Trimble Ventures is focused on investing in innovative early-stage and growth-stage companies that provide solutions related to hardware and software applications.

That includes artificial intelligence; augmented, virtual, and mixed reality; autonomy and robotics; blockchain; the Internet of Things (IoT); analytics; and sustainability.

Rob Painter, president and CEO, noted, “By providing capital, industry expertise and broader access to markets for early and growth-stage companies, we can help them scale more rapidly. In addition, our partners can help extend Trimble’s platforms to better serve our collective customers.” (Source: Ibid.)

New Share Repurchase Program

Many companies shored up their bottom lines in 2020 by suspending their share repurchase programs. Trimble didn’t, though. It repurchased $81.6 million worth of its own shares that year, even though Trimble stock rallied by 60% in 2020.

TRMB stock might be up by 81% year-to-date, but the company is still aggressively buying its shares back. By mid-August, Trimble had repurchased approximately 600,000 shares of its common stock in open-market purchases. Those buybacks were at an average price of $71.24 per share, for a total of approximately $40.0 million.

The company is about to repurchase a lot more, too. On August 19, Trimble Inc’s board of directors authorized a new $750.0-million share repurchase program. (Source: “Trimble Announces New Share Repurchase Program,” Trimble Inc, August 19, 2021.)

The new program replaces the 2017 authorization of $600.0 million, of which just $50.7 million was remaining, that has been canceled.

Record Q2 Results

For the second quarter ended June 30, Trimble Inc announced that its revenue increased by 29% year-over-year to $945.2 million. Its annualized recurring revenue advanced 11% to $1.4 billion. (Source: “Trimble Announces Record Second Quarter 2021 Results,” Trimble Inc, August 4, 2021.)

The company’s second-quarter operating income was up by 48%, at $144.8 million. Its net income came in at $138.9 million, or $0.55 per share, a 120% increase over the second-quarter 2020 net income of $63.0 million, or $0.25 per share.

Trimble Inc’s adjusted earnings per share were $0.72, versus $0.52 in the same prior-year period. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $249.3 million, up by 31% from $189.3 million in the same period last year.

For fiscal 2021, Trimble expects to report revenue between $3.55 billion and $3.65 billion, up from a previous guidance range of $3.39 billion to $3.49 billion. The company also espects to report earnings per share of $1.53 to $1.71, up from previous guidance of $1.49 to $1.68

Analyst Take

Trimble Inc is a great tech company that continues to defy its own financial projections.

Its first- and second-quarter results exceeded expectations. The company’s growth in total revenue, annualized recurring revenue, and adjusted EBITDA reflect the company’s underlying strength. That has allowed Trimble to increase its full-year guidance.

Tech stocks might be wobbly right now, but the strong adoption of 5G wireless technology points to excellent long-term growth for Trimble stock.