Itron (ITRI) Gains 30.8% YTD: Will the Upward Trend Last?
Itron ITRI is witnessing solid momentum, with shares having gained 30.8% year to date against the 4.6% decline of the sub-industry. S&P Composite has improved 18.1% over the same period.
With healthy fundamentals and strong growth opportunities, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at the moment.
Apart from a favorable rank, ITRI has a VGM Score of A. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or #2 and a VGM Score of A or B offer solid investment opportunities.
Headquartered in Liberty Lake, WA, Itron is one of the leading global suppliers of a wide range of standard, advanced and smart meters and meter communication systems. It also provides networks and communication modules, software, services and sensors for the effective management of electricity, gas and water resources for consumers.
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Catalysts Driving Growth
The increase in share price can be attributed to strong third-quarter 2023 results.
Non-GAAP earnings came in at 98 cents per share in third-quarter 2023, surpassing the Zacks Consensus Estimate by 92.2%. The company reported earnings of 23 cents in the prior-year quarter. Revenues were $561 million, which beat the Zacks Consensus Estimate by 3.7%. The top line improved 33% year over year.
The top-line performance was driven by robust operational execution, resulting in increased shipments to customers amid the easing of supply-chain issues. Accelerating trends in electrification, gas safety, energy transition, grid edge digitalization, water efficiency are likely to drive demand for the company’s solutions going ahead. Management noted that utilities across Asia-Pacific are working on improving grid stability and reliability. This represents a strong opportunity for Itron.
Continued momentum in software license sales driven by Distributed Intelligence offerings also bodes well. It expects increased demand for electric vehicles and distributed energy resource management to drive customer bookings in the future. By the end of third-quarter 2023, the company’s bookings were $413 million and backlog amounted to $4.3 billion. Management expects bookings to be $2 billion for the current year.
The Device Solutions segment is being driven by increasing demand for Itron’s solutions in the fast-growing Water vertical. The Outcomes segment is benefiting from higher recurring services revenues.
ITRI’s extensive restructuring efforts to cut down on overhead expenses and streamline its supply chain and manufacturing operations augur well. Strategic collaboration and frequent product launches are added positives.
Driven by strong third-quarter results, the company made upward revisions to its 2023 guidance. It now projects revenues to be between $2.16 billion and $2.17 billion. Non-GAAP earnings per share are estimated in the $2.83-$2.93 band.
Earlier, ITRI predicted revenues in the range of $2.11-$2.14 billion. Non-GAAP earnings per share were envisioned to be between $2.03 and 2.28.
However, rising operating expenses coupled with a leveraged balance sheet remain major headwinds. Uncertainty prevailing over global macroeconomic conditions, as well as volatile supply-chain dynamics, remain concerning.
A Look at Estimates
Itron’s revenues are suggested to improve by 20.8% and 5.4% on a year-over-year basis in 2023 and 2024, respectively.
The bottom line is anticipated to rise 138% and 10.3% on a year-over-year basis in 2023 and 2024, respectively. The Zacks Consensus Estimate for 2023 and 2024 earnings per share is pegged at $2.69 and $2.97, respectively, up 24.5% and 8.8%, respectively, in the past 60 days.
ITRI has delivered an earnings surprise of 289.3%, on average, in the trailing four quarters.
Other Key Picks
Some other top-ranked stocks worth consideration in the broader technology space are Adobe ADBE, Synopsys SNPS and Cadence Design Systems CDNS, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Adobe’s fiscal 2023 EPS has increased by 0.3% in the past 60 days to $15.93. ADBE’s long-term earnings growth rate is 13.5%.
Adobe’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 3.3%. Shares of ADBE have climbed 76.2% in the past year.
The Zacks Consensus Estimate for Synopsys’ fiscal 2023 EPS has remained flat in the past 60 days at $11.09. SNPS’ long-term earnings growth rate is 16.7%. Shares of SNPS have gained 63.2% in the past year.
The Zacks Consensus Estimate for Cadence 2023 EPS has improved 0.4% in the past 60 days to $5.11.
Cadence’s earnings outpaced the Zacks Consensus Estimate in each of the last four quarters, the average earnings surprise being 4.1%. Shares of CDNS have jumped 61% in the past year.
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Itron, Inc. (ITRI) : Free Stock Analysis Report
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