Trimble's Growth Catalysts: Analyst Upgrades Stock On Strong Growth Potential Amid Debt Reduction And Buyback

Piper Sandler analyst Clarke Jeffries upgraded Trimble Inc. TRMB to Overweight from Neutral, raising the price target to $68 from $51.

The analyst upgraded the stock with a focus on upcoming catalysts like resegmentation in the first half of the year, debt paydown worth $1.1 billion, up to $800 million of share repurchases in 2024.

Yesterday, Trimble beat fourth-quarter expectations with 9% revenue growth and strong recurring revenue.

While FY24 revenue guidance was below the analyst’s estimate, the primary difference was the timing of the transaction close & a lower Ag run-rate in the first quarter, based on partnership transition, Jeffries added.

On a pro forma basis (excluding Precision Ag from FY23 & FY24), the underlying business is expected to grow ~8% y/y (5.5% organic) with ~27% EBITDA margins, the analyst notes.

Per the analyst, Trimble could at last be in a place where a software-centric bull case could emerge where recurring revenue rises beyond 55% of mix, growing double-digits organically, capable of delivering mid-teens EBIT growth. 

The analyst raised FY24 EPS estimate to $2.75 from $2.61.

Price Action: TRMB shares are trading higher by 2.91% to $56.28 on the last check Tuesday.