Trimble Inc. (NASDAQ:TRMB) may want to consider selling its agriculture business as a divestiture could unlock $3 billion in value, according to Bernstein.
A potential sale of the agriculture business may unlock about $3 billion in incremental value, representing 15%-20% upside from current market value, according to Bernstein analyst Chad Dillard. The sale would also sharpen management’s focus on construction tech and it would allow Trimble it to “profitably exit an end market in which it will operate at a greater competitive disadvantage as times goes on.”
On a standalone basis, the precision ag business is valued at about $5.6 billion, Bernstein’s Dillard, who has an outperform rating and $95 price target on TRMB, wrote in a note. In a sum-of-the-parts analyst Trimble is worth $19 billion vs the current market value of $16 billion.
“With these proceeds, Trimble would have enough dry powder to curate its construction tech product offering as it sees fit through M&A and can compete against better capitalized peers such as Autodesk.,” DIllard wrote. “Now is the time to consider this option. Crop prices are at a record, farmers are swimming in cash, all of which translate to attractive multiples for precision ag companies.”
Last month, Trimble agreed to divest four businesses to focus on strategic products.