Geospatial technology provider Trimble (NASDAQ:TRMB) reported results ahead of analysts' expectations in Q2 CY2024, with revenue down 12.4% year on year to $870.8 million. On the other hand, next quarter's revenue guidance of $860 million was less impressive, coming in 1.3% below analysts' estimates. It made a non-GAAP profit of $0.62 per share, down from its profit of $0.64 per share in the same quarter last year.
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Trimble (TRMB) Q2 CY2024 Highlights:
- Revenue: $870.8 million vs analyst estimates of $862.5 million (small beat)
- EPS (non-GAAP): $0.62 vs analyst estimates of $0.58 (6.6% beat)
- Revenue Guidance for Q3 CY2024 is $860 million at the midpoint, below analyst estimates of $871.1 million
- The company slightly lifted its revenue guidance for the full year from $3.62 billion to $3.63 billion at the midpoint
- EPS (non-GAAP) guidance for Q3 CY2024 is $0.61 at the midpoint, below analyst estimates of $0.63
- EPS (non-GAAP) guidance for the full year is $2.74 at the midpoint, roughly in line with what analysts were expecting
- Gross Margin (GAAP): 62.7%, down from 63.8% in the same quarter last year
- Adjusted EBITDA Margin: 24.6%, in line with the same quarter last year
- Free Cash Flow of $73.3 million, down 67.7% from the previous quarter
- Organic Revenue rose 1% year on year (3% in the same quarter last year)
- Market Capitalization: $12.17 billion
"Strong execution across our business resulted in revenue and EPS above the midpoint of guidance. ARR reached a record $2.11 billion and gross margin also achieved a record level," said Rob Painter, Trimble's President and CEO.
Playing a role in the construction of the Paris Grand, Trimble (NASDAQ:TRMB) offers geospatial devices and technology to the agriculture, construction, transportation, and logistics industries.
Internet of Things
Industrial Internet of Things (IoT) companies are buoyed by the secular trend of a more connected world. They often specialize in nascent areas such as hardware and services for factory automation, fleet tracking, or smart home technologies. Those who play their cards right can generate recurring subscription revenues by providing cloud-based software services, boosting their margins. On the other hand, if the technologies these companies have invested in don’t pan out, they may have to make costly pivots.
Sales Growth
A company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Regrettably, Trimble's sales grew at a weak 2.8% compounded annual growth rate over the last five years. This shows it failed to expand in any major way and is a rough starting point for our analysis. 
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Trimble's recent history shows its demand slowed as its revenue was flat over the last two years. We also note many other Internet of Things businesses have faced declining sales because of cyclical headwinds. While Trimble's growth wasn't the best, it did perform better than its peers.
We can dig further into the company's sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations because they don't accurately reflect its fundamentals. Over the last two years, Trimble's organic revenue averaged 4.7% year-on-year growth. Because this number is better than its normal revenue growth, we can see that some mixture of divestitures and foreign exchange rates dampened its headline performance. 
This quarter, Trimble's revenue fell 12.4% year on year to $870.8 million but beat Wall Street's estimates by 1%. The company is guiding for a 10.2% year-on-year revenue decline next quarter to $860 million, a reversal from the 8.2% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects revenue to decline 1.4% over the next 12 months.
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Operating Margin
Trimble has been an optimally-run company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 12.9%. This result isn't surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, Trimble's annual operating margin decreased by 1.5 percentage points over the last five years. Even though its margin is still high, shareholders will want to see Trimble become more profitable in the future.
This quarter, Trimble generated an operating profit margin of 7.1%, down 2.3 percentage points year on year. Since Trimble's operating margin decreased more than its gross margin, we can assume the company was recently less efficient because expenses such as sales, marketing, R&D, and administrative overhead increased.
EPS
Analyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Trimble's EPS grew at an unimpressive 5.7% compounded annual growth rate over the last five years. This performance was better than its 2.8% annualized revenue growth but doesn't tell us much about its day-to-day operations because its operating margin didn't expand.
Diving into the nuances of Trimble's earnings can give us a better understanding of its performance. A five-year view shows that Trimble has repurchased its stock, shrinking its share count by 3%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings. 
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Trimble, its two-year annual EPS declines of 1.7% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.
In Q2, Trimble reported EPS at $0.62, down from $0.64 in the same quarter last year. Despite falling year on year, this print beat analysts' estimates by 6.6%. Over the next 12 months, Wall Street expects Trimble to grow its earnings. Analysts are projecting its EPS of $2.57 in the last year to climb by 16.1% to $2.98.
Key Takeaways from Trimble's Q2 Results
It was good to see Trimble beat analysts' revenue and EPS expectations this quarter. We were also glad it slightly raised its full-year revenue guidance. On the other hand, its organic revenue missed fell short. Overall, this was still a good quarter for Trimble. The stock traded up 6.8% to $53.21 immediately following the results.
So should you invest in Trimble right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.