Is This GPS Specialist Ready to Take on a New Industry?

Trimble Navigation gives more than just driving directions, and with a mining equipment acquisition it looks like it's ready to take its business to an even higher level.

Jun 26, 2014 at 10:22AM

Mining is increasingly getting automated, a specialty of Trimble Navigation (NASDAQ:TRMB). However, a recently announced acquisition will allow this GPS specialist to give miners a complete view of their mining operations. That's the direction that more and more miners are going in, and Trimble Navigation is clearly getting ready to go along for that ride.

More productivity and saving lives
Giving human operators a helping hand is what Trimble Navigation is all about. Although not a Trimble Navigation deal, Canada's Teck Resources (NYSE:TCK) is a great example of how adding technology to heavy machinery can help. Teck Resources, working with privately held SAFEmine, tested adding collision avoidance systems at its mines.

The results were nothing short of impressive: speeding incidents, "close interactions" between small vehicles and trucks, and "close interactions" between large trucks all fell about 50%. It's no wonder that Teck Resources made the decision to roll this technology, which is heavily dependent on GPS systems, out across more of its mine sites. This despite an effort to reduce its mining costs.

But Teck Resources is willing to spend on results like the ones seen from SAFEmine's equipment. It will help keep miners safe, protect valuable equipment, and reduce downtime incidents. Cost containment is an issue throughout the mining industry today, but Teck's results show why technology investment hasn't stopped. For example, Rio Tinto (NYSE:RIO) continues to push toward its "mine of the future" goal. For example, since commodity prices have headed lower, Teck Resources has managed to trim its ongoing costs by roughly $345 million. It's planning on doing even more, targeting another $350 million of cost reductions. All this in an effort to keep margins up in a difficult market. For example, the company's operating margin has fallen in each of the last two years, dropping from nearly 39% in 2011 to around 22% last year.

Mining is changing with technology
What's the mine of the future? It's a high tech mine that uses such technology as autonomous trucks and trains, and centralized monitoring. For example Rio Tinto just unveiled its "Processing Excellence Centre" in Australia. This one control room oversees seven Rio Tinto mines located in Mongolia, the United States, and Australia. That's the type of high-tech product that Trimble Navigation just added with the announced acquisition of Mining Information Systems.

And Rio Tino's efforts show why such technology spending will stay solid. In 2013, Rio Tinto reduced its operating costs by $2.3 billion while at the same time increasing production across its operations by 9%. Although there's a lot of moving parts in this, spending to get a better handle on its mining operations is a big piece of the picture.

Trimble is more than farming
Trimble Navigation is usually lumped in with the GPS industry, which makes complete sense since it's technology makes extensive use of GPS. However, Trimble Navigation does more than just provide drivers with directions. For example, the company offers systems that actually drive farm equipment. Wait, that's exactly what Rio Tinto is doing to its trucks and trains!

TRMB Chart

TRMB data by YCharts

And now, Trimble Navigation is buying a company that specializes in, "enterprisewide monitoring and management of mining and ore processing operations." That's roughly similar to Rio Tinto's "Processing Excellence Centre." It's also like what Teck Resources is doing, on a smaller scale, with its anti-collision efforts.

Trimble Navigation clearly sees an opportunity to integrate its technology into something bigger. And while the mining industry shows that this trend is real, Trimble's diverse business will allow this GPS specialist to offer valuable monitoring and control equipment well beyond the miners.

Trimble Navigation's operating margin has increased in each of the last three years. If it keeps building its technology offerings, look for margins to get back to the mid-teen levels seen during the middle of the last decade. And with revenues hitting new highs, that should translate into continued earnings growth for a company that's embedding GPS into high-tech gear for increasingly tech-savvy industrial players.

Connecting a mine is great, but what if you could connect you?

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven't heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America's greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, "The IRS Is Daring You to Make This Investment Now!," and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers