Itron's Rev Beats, EPS Lags

Zacks

Itron, Inc.’s (ITRI) fourth-quarter 2012 adjusted earnings stood at 58 cents per share compared with $1.19 in the year-earlier quarter. Adjusted earnings fell short of the Zacks Consensus Estimate of 64 cents per share. Including one time items, earnings in the quarter came in at 40 cents per share compared with the year-ago quarter’s loss of $1.35 per share.

Total revenue during the quarter fell 18.5% to $523 million, ahead of the Zacks Consensus Estimate of $469 million. The decline in revenues was mainly due to an unfavorable $9 million impact from foreign currency translation. Moreover, the Water segment’s higher revenues were offset by lower revenue in the Energy segment due to the completion of several OpenWay projects in North America
 
Cost and Margins
 
Cost of goods sold declined 20% to $360 million. Gross profit also dropped 15% to $163 million. However, gross margin expanded 120 basis points to 31.2%. The improvement was driven by lower warranty costs and manufacturing efficiencies at the Energy segments, partially offset by the impact of lower volumes and product mix. 
 
Adjusted operating expenses increased 5% to $133.9 million in the quarter. Adjusted operating profit declined 53% to $30.3 million. Including one-time items, operating income was $19.5 million in the reported quarter compared to an operating loss of $60 million in the year-ago quarter.
 
Fiscal 2012 Performance
 
Itron reported adjusted earnings per share of $3.62 in 2012 compared with $4.19 in 2011. Adjusted earnings lagged the Zacks Consensus Estimate of $2.38 per share. Including one-time items, earnings were $2.71 per share compared with a loss per share of $12.56 in the prior year. Total revenue during the quarter fell 10.5% to $2178 billion.
 
Financial Position
 
As of Dec 31, 2012, Itron had cash and cash equivalents of $136.4 million compared with $133 million as of Dec 31, 2011. Cash from operations decreased to $205 million in 2012 from $252 million in the prior year. The debt-to-capitalization ratio improved to 29.6% as of Dec 31, 2012 from 33.3% as of Dec 31,  2011.
 
During the quarter, Itron repurchased 157,772 shares of its common stock at an average price of $42.73 per share. The company has repurchased approximately 2 million shares of Itron common stock at an average price of $37.96 per share since the inception of the program, representing 5% of total shares outstanding as of Oct 2011.
 
Outlook
 
The company has initiated revenue guidance in the range of $2.0 billion to $2.1 billion and adjusted EPS guidance of $3.00-$3.25.
 
Liberty Lake, Wash-based Itron Inc., along with its subsidiaries, is one of the principal technology providers to the energy and water industries worldwide. It produces electricity, gas, water, and heat meters, data collection and utility software solutions along with various other associated metering products for residential, commercial and industrial, and transmission and distribution customers. Itron currently has a short-term Zacks #4 Rank (Sell). 
 
Peer Performance
 
National Instruments Corporation (NATI) reported fourth quarter adjusted EPS of 29 cents compared with 27 cents in the year ago quarter. Ametek Inc. (AME) reported fourth quarter earnings per share of 49 cents compared with 42 cents in the prior year quarter. Teradyne Inc (TER) reported fourth-quarter 2012 earnings of 7 cents per share compared with 16 cents per share in the year ago quarter.
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