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Itron (ITRI) Up 1.1% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Itron (ITRI). Shares have added about 1.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Itron due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Itron Q3 Earnings and Revenues Surpass Estimates

Itron, Inc. reported third-quarter 2019 non-GAAP earnings of $1.04 per share, which beat the Zacks Consensus Estimate by 37 cents. The figure was down 8% from the year-ago quarter but up 19.5% sequentially.

Revenues came in at $624.47 million, which surpassed the Zacks Consensus Estimate by 1%. Further, the figure improved 5% year over year or 7% on a constant-currency basis.

The top line was driven by robust performance of the company’s networked solutions segment. Further, solid customer demand acted as a tailwind.

Product and services revenues — which accounted for 88.5% and 11.5% of total revenues — improved 5.2% and 1.2%from the year-ago quarter, respectively.

Its bookings were $609 million and backlog was $3.1 billion during the reported quarter.

Segments in Detail

Device Solutions: Revenues in this segment decreased 3% year over year but increased 1% on a constant-currency basis. The decrease was due to lower electric smart step demand in the EMEA region, partially offset by increased water shipments globally.

Networked Solutions: Revenues from this segment increased 11% from the year-ago quarter and 12% on a constant-currency basis. This increase was primarily driven by stronger-than-expected demand in North America. Further, growing customer deployments contributed to the results.

Outcomes: Revenues in this segment were down 1% year over year but increased 1% on a constant-currency basis. The decrease was due to decline in prepaid shipments in the EMEA region. However, the company witnessed persistent growth in North America deployments.

Operating Details

In the third quarter, Itron’s gross margin was 31.5%, down 160 basis points (bps) from the prior-year period. The decrease was due to an unfavorable product mix and higher warranty costs.

Non-GAAP operating expenses were $130.4 million, up 2.9% year over year. This increase was due to increased variable compensation.

Further, non-GAAP operating margin came in at 6.3%, down 70 bps from the year-ago quarter.

Balance Sheet and Cash Flows

At the end of the third quarter, cash and cash equivalents totaled $140.9 million, up from $135.7 million in the second quarter. Accounts receivables were $468.5 million, up from $466.4 million in the second quarter.

Itron generated $50 million cash from operations compared with $53.1 million in the second quarter.

Moreover, the company generated free cash flow of $32 million, down from $38.04 million in the second quarter.

2019 Guidance

For 2019, the company has maintained its revenues guidance in the range of $2.45-$2.50 billion. 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -19.35% due to these changes.

VGM Scores

At this time, Itron has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Itron has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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