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Itron, Inc. Message Board

  • germantrader71 germantrader71 Jul 22, 2010 8:03 AM Flag


    Emerging technology
    Carter B Shoop :- ESE(Hold to Buy, tgt $33 to $35), ITRI (Maintain Buy, tgt $87 to
    $70) ESCO announced that it has entered into final contract negotiations with the
    6mln point utility SoCal Gas for its AMI gas network. Following customary
    negotiations, we expect ESCO to formally announce the final contract in 1-2
    months (we see little risk of negotiations breaking down). We estimate this
    contract will be worth $55-65mln in sales and $0.35-0.45 in EPS per year for ESCO
    starting in 2012. This is a setback to Itron, who clawed its way back into
    contention for this contract over the past 6 months and had been viewed as the
    front runner.


    Itron: lowering PT as medium term outlook appears increasingly challenging
    We believe the loss at SoCal Gas this week, and CMP and PECO the prior two
    weeks, raise questions about Itron’s 1) ability to close the ‘big deal’, 2) technology
    offering and 3) 2012 outlook. While we see more upside vs downside risk to nearterm
    estimates (SoCal Gas wasn’t supposed to ramp until 2012; Itron can still
    capture $5mln/yr in meter related sales from SoCal Gas), we are increasingly
    concerned about the company’s medium term outlook as its 3 large contracts
    wind down in 2H11/1H12. Given this uncertain near-term outlook, investors’
    growing concern about Itron’s execution, and lack of near-term catalysts (30%
    chance of winning BGE, if the utility gets approval), we believe it is prudent to
    lower our price target at this time.
    Our new $70 PT (Previously $87) assumes that Itron trades at 17x our CY11E EPS
    est (vs 21x previously). We believe this lower multiple is justified given the
    deteriorating macro-economic trends and the fact that the company's single most
    important near-term catalyst has passed. Downside risks include lower than
    expected profitability for AMI ramps, delays in Europe’s AMI roll-out and potential
    IPOs by competitors.

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