Shares in positioning and workflow technology company Trimble (TRMB 1.63%) rose nearly 15% in December, according to data provided by S&P Global Market Intelligence. The move comes as the market took a brighter view of growth prospects in 2024 on the back of the potential for lower interest rates.

After almost hitting 5% in October, the 10-year Treasury yield has been in a steady downtrend that continued through December as the market began pricing in the potential for the Federal Reserve to cut interest rates in 2024. That's good news for companies with economically sensitive revenue streams.

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Trimble is definitely one of those. Indeed, on the company's last earnings call in early November, CEO Rob Painter acknowledged that the weakness in the global economy was weighing on the company's growth prospects. He noted, "We see increasing signs of weakness and stress across many end markets and geographies, exacerbated by interest rates, war, and geopolitical tensions."

The bullish case investors bought into in December is that lower rates in 2024 will benefit many of Trimble's key end markets, including buildings and construction (notably residential) and transportation (notably the freight market).

Trimble's slowing revenue growth

The current slowdown in Trimble's markets is best seen in its product (hardware and perpetual license) sales growth. At the end of the third quarter, the trailing-12-month product revenue stood at $1.78 billion, compared to nearly $2 billion at the end of 2022 and $2.14 billion at the end of 2021.

Don't be alarmed by these figures, because Trimble's overall revenue is still growing. Moreover, the company's revenue naturally transitions toward more subscription and recurring services revenue as part of Trimble's "connect and scale" strategy. In other words, Trimble's offerings aren't just about precise positioning data anymore. The company's technology is increasingly becoming a part of its customers' planning, modeling, and analytical activity on a real-time basis.

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The critical number to monitor

In addition, the key metric to follow at Trimble isn't revenue; it's its annualized recurring revenue (ARR). The good news is management sees ARR growing at 13% in 2023 to around $2 billion, with double-digit growth in 2024 as well.

Recurring revenue is the key to generating cash-flow growth, and that's why Wall Street analysts expect Trimble's free cash flow to grow from almost $600 million in 2023 to $844 million in 2025. As a reminder, Trimble's current market cap is $12.7 billion, making the stock look like an excellent value if it hits analysts' expectations.

The icing on the cake would be some cyclical benefit to its growth from lower interest rates in 2024.