U.S. Markets closed

Itron (ITRI) Beats on Q2 Earnings & Revenues, Raises Outlook

Zacks Equity Research

Itron, Inc. ITRI delivered second-quarter 2019 non-GAAP earnings of 87 cents per share beating the Zacks Consensus Estimate by 39 cents. The figure improved significantly by 70.6% from the year-ago quarter and 24.3% sequentially.

Revenues came in $635.04 million, which surpassed the Zacks Consensus Estimate of $602 million. Further, the figure advanced 8.4% year over year and 3.3% from the previous quarter.

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

Product and services revenues accounted for 89.1% and 10.9% of total revenues, respectively. While product revenues improved 9.7% from the year-ago quarter, services revenues declined 1.4%.

The company’s bookings were $702 million and backlog came in at $3.1 billion during the reported quarter.

Following the better-than-expected first-quarter results, shares of the company have risen 4.38% in the after-hours trade. Additionally, Itron has provided stronger than previous outlook for 2019 which is instilling confidence in the stock.

Notably, Itron has gained 22.5% on a year-to-date basis, outperforming the industry’s rally of 10.4%.

Segment in Detail

Device Solutions: The company generated $217.7 million revenues (34.3% of total revenues) from this segment, down 7.8% from the year-ago quarter. This was primarily owing to decline in smart spec volumes in the EMEA region during the reported quarter. Moreover, foreign exchange headwinds impacted the segment’s top line. Further, operating margin of this segment contracted 160 bps year over year.

Networked Solutions: Revenues from this segment came in $355.9 million (56% of total revenues), increased 20.2% year over year. This was primarily driven by stronger-than-expected demand in North America. Further, growing customer deployments contributed to the results. However, operating margin contracted 20 bps year over year during the reported quarter.

Outcomes: This segment generated $61.4 million revenues (9.7% of total revenues), up 15% on a year-over-year basis. The company witnessed persistent growth in North America deployments, which in turn drove the segment’s top line. Moreover, early deployment of onetime software licenses in the second quarter remained a major positive. Furthermore, operating margin came in 23.4% against 7.9% in the year-ago quarter.

Operating Details

For the second quarter, Itron’s gross margin was 30.1%, which remained flat on a year-over-year basis. This can be attributed to high component costs, which offset the positive impact of favorable product mix.

Non-GAAP operating expenses were $128.04 million, down 3.4% year over year. This decrease resulted from strong restructuring initiatives.

Further, non-GAAP operating margin came in 9.9%, expanding 240 bps from the year-ago quarter.

Itron, Inc. Price, Consensus and EPS Surprise


Itron, Inc. Price, Consensus and EPS Surprise

Itron, Inc. price-consensus-eps-surprise-chart | Itron, Inc. Quote

Balance Sheet and Cash Flows

As of Jun 30, 2019, cash and cash equivalents totaled $135.7 million, up from $110.8 million as of Mar 31, 2019. Accounts receivables were $466.4 million, declining from $473.1 million in the previous quarter.

Itron generated $53.1 million cash from operations compared with $24.9 million generated in the previous quarter.

Moreover, the company generated free cash flow of $38.04 million, up from $13.5 million in prior quarter.

2019 Guidance

For 2019, management has revised the non-GAAP earnings guidance upward from $2.35-$2.75 to $2.80-$3.00 per share. The Zacks Consensus Estimate for earnings is pegged at $2.64.

Further, the company expects revenues within a range of $2.45-$2.50 billion which is higher than the previously guided range of $2.35-$2.45 billion. The Zacks Consensus Estimate for revenues is projected at $2.44 billion.

Zacks Rank and Stocks to Consider

Itron currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Rosetta Stone RST, Oracle ORCL and CACI International CACI. While Rosetta Stone sports a Zacks Rank #1 (Strong Buy), Oracle and CACI carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Rosetta Stone, Oracle and CACI is projected to be 12.5%, 9.8% and 10%, respectively.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
CACI International, Inc. (CACI) : Free Stock Analysis Report
Oracle Corporation (ORCL) : Free Stock Analysis Report
Rosetta Stone (RST) : Free Stock Analysis Report
Itron, Inc. (ITRI) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research