Trimble's earnings target holds up as recurring growth slows
The company cut its recurring-revenue growth forecast as two businesses slowed. Its adjusted earnings target barely changed, but it now expects a larger reported loss.
Trimble lowered its annual growth forecast for recurring revenue while leaving its adjusted earnings-per-share target almost unchanged. Slower growth in Field Systems and Transportation & Logistics is taking some momentum out of a business increasingly built around software.
The company now expects about 10% organic growth in annualized recurring revenue, down from its previous 12% to 14% forecast. The measure estimates a year's recurring revenue at the current pace. Organic growth removes currency changes and the effects of acquisitions and divestitures.
Research by Ticker Byline shows that the midpoint of Trimble's adjusted earnings-per-share forecast rose by just one cent. The new range is $3.63 to $3.69, compared with $3.60 to $3.70 in August.
Construction software holds up better
Trimble's architecture, engineering and construction software business reported 13% organic recurring-revenue growth in the third quarter. Field Systems and Transportation & Logistics each managed 5%.
Management cited lower-than-expected growth in those latter two businesses when reducing the annual forecast. Its construction software business continued to grow more strongly. Across Trimble, annualized recurring revenue reached a company-reported record $2.56 billion.
Quarterly revenue of $966.8 million was within the original $953 million to $978 million forecast. Adjusted earnings of 86 cents a share also stayed within the earlier 83 to 88 cent range.
The reported loss forecast widened
The nearly steady adjusted earnings target sits alongside a larger expected reported loss. Trimble now forecasts an annual loss of 49 to 55 cents a share, compared with 7 to 12 cents previously.
The current quarterly report records a $107.6 million one-time reserve for an uncertain tax position related to an internal restructuring. A deferred tax benefit from that restructuring partly offsets the charge. The annual reported result also includes a separate $562 million goodwill impairment recorded in the second quarter.
Trimble removes specified accounting items when calculating adjusted earnings. The gross tax reserve differs from both total quarterly tax expense and the net tax adjustment used in that calculation.
Cash improved as tax payments fell
Nine-month operating cash flow rose to $664.7 million from $225.9 million. Cash income taxes fell to $55.7 million from $392.2 million. Management attributes the improvement mainly to lower tax payments and higher operating income.
The Trimble company profile tracks the recurring-revenue outlook, cash generation, completed acquisitions and the fiscal-calendar change affecting next year's results.