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Itron's (ITRI) Q3 Earnings Beat Estimates, Revenues Up Y/Y

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Itron's (ITRI) Q3 Earnings Beat Estimates, Revenues Up Y/Y

Itron's (ITRI) third-quarter results benefit from solid performance of gas and network segments.

Itron, Inc. ITRI delivered third-quarter 2018 non-GAAP earnings of $1.13 per share beating the Zacks Consensus Estimate by 24 cents. The figure soared a whopping 121.6% on a sequential basis and 46.7% year over year.

Revenues came in $595.96 million, improving 22.4% from the year-ago quarter and 1.7% sequentially. The top line was driven by robust performance of gas and network segments of the company.

Further, accelerating product and services revenues, accounting for 88.2% and 11.8% of the total revenues, improved 21.1% and 32.9% from the year-ago quarter, respectively. This aided the results.

However, Itron’s revenues missed the Zacks Consensus Estimate of $606 million. The company remained affected by supply chain headwinds in the reported quarter.

The company’s bookings were $593 million, up 72.9% year over year. The company’s backlog came in at $3.1 billion, increasing a whopping 106.7%, year over year. Further, its 12-month backlog came in at $1.4 billion, up 65.3% from year-ago quarter.

Coming to the price performance, shares of Itron have lost 18.1% on a year-to-date basis, compared with the industry’s decline of 0.4%.

Segment in Detail

Electricity: The company generated $236.8 million revenues (39.7% of total revenues) from this segment, down marginally 1.4% from the year-ago quarter. The company witnessed strong smart devices shipments in North America and EMEA region which was offset by sluggish industrial and commercial shipments in Latin America and Asia Pacific regions. Nevertheless, non-GAAP operating margin was 12.2% in this segment, expanding 160 basis points (bps) year over year. This was due to restructuring benefits.

Gas: Revenues from this segment came in $156.7 million (26.3% of total revenues), increased 18.9% year over year. This was driven by robust smart devices shipments in EMEA region and module shipments in North America. Further, the non-GAAP operating margin expanded 420 bps from the year-ago quarter to 20.2%. This can be attributed to lower operating expenses in this segment.

Water: This segment generated $112.6 million revenues (18.9% of total revenues), down 1.9% on a year-over-year basis.The company experienced steady demand from Latin American residential projects and improved deployments in Australia. However, Itron faced lower module shipment during the reported quarter. Non-GAAP operating margin was 7.4%, contracting 520 bps. This was due to higher commodity costs.

Networks: This segment generated $89.8 million revenues (15.1% of total revenues) in the third quarter. The segment became operative with the acquisition of Silver Spring Networks. Without the contributions from this segment, the total revenues of Itron would have exhibited growth of 4% from the year-ago quarter. Increasing new deployments and improved customer projects timing drove the top line within this segment. Further, the segment reported operating margin of 7.9%, attributable to favorable product mix.

Itron, Inc. Price, Consensus and EPS Surprise


Itron, Inc. Price, Consensus and EPS Surprise | Itron, Inc. Quote

Operating Details

For the third quarter, Itron’s gross margin was 33.1%, contracting 100 bps from the prior-year quarter. This was due to increasing costs and inefficiencies related to supply chain.

Non-GAAP operating margin came in 11.8%, expanding150 bps from the year-ago quarter. This was driven by positive contributions from Silver Spring Networks buyout. Further, strong performance of gas segment contributed well.

Non-GAAP operating expenses were $126.7 million, up 9.9% year over year. This increase was due to expenses related to acquisitions.

Balance Sheet and Cash Flows

As of Sep 30, 2018, cash and cash equivalents totaled $109 million compared with $162.9 million as of Jun 30, 2018. Accounts receivables were $449.6 million, increasing from $443.4 million in the previous quarter.

Itron generated $51 million cash from operations compared with $41.3 million generated in the previous quarter.

Moreover, the company generated free cash flow of $37 million, up from $29.4 million in prior-quarter.


For 2018, Itron revised the guidance for revenues downward from $2.425-$2.475 billion to $2.37-$2.39 billion. The Zacks Consensus Estimate for revenues is pegged at $2.45 billion.

The company also revised the guidance for non-GAAP earnings downward from $2.75-2.90 per share to $2.40-2.50 per share. The Zacks Consensus Estimate is projected at $2.73 per share.

The company anticipates inefficiencies related to supply chain to continue affecting its top-line growth. Further, component shortages and extended lead times remain headwinds.

Zacks Rank and Stocks to Consider

Itron currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the broader technology sector are Twitter, Inc. TWTR, Intel Corporation INTC and Adobe Systems Incorporated ADBE. While Twitter and Intel sport a Zacks Rank #1 (Strong Buy), Adobe Systems carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Twitter, Intel and Adobe Systems is projected to be 22.05%, 8.42% and 16.4%, respectively.

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