What: Shares of GPS technologist Trimble Navigation (NASDAQ:TRMB) sank as much as 16% today after its quarterly results and outlook disappointed Wall Street.
So what: Trimble shares have been crushed over the past year on slumping demand, and today's Q3 results -- revenue fell 9% to $585.8 million -- coupled with downbeat guidance for the current quarter suggest that the negative trend isn't slowing anytime soon. Additionally, Trimble's adjusted operating margin shrank sharply to just 16.6% versus 23.2% in the year-ago period, giving analysts very little confidence in the company's competitive position going forward.
Now what: Management now sees Q3 EPS of $0.19-$0.26 on revenue of $535 million-$560 million, well below the consensus top-line view of $610.4 million. "We met our revenue and profit expectations in the quarter despite the ongoing challenges of agriculture, exchange rates, and the primary and secondary effects of the oil price shock," said CEO Steven W. Berglund. "We also saw a sharp pullback in the Chinese and Brazilian markets, reflecting new investment uncertainty in both markets. Although this regional decline will place pressure on our second half, our basic outlook for 2016 remains consistent -- with both a return to revenue growth and traditional operating margins." When you combine Trimble's seriously worrisome sales trend with its still-hefty debt load, however, I'd wait for some clear signs of improvement before betting on that turnaround talk.