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Itron (ITRI) Q1 Earnings & Revenues Lag Estimates, Fall Y/Y

Zacks Equity Research

Itron, Inc. ITRI reported first-quarter 2020 non-GAAP earnings of 57 cents per share, which missed the Zacks Consensus Estimate by 3.4%. Further, the bottom line declined 18.6% from the year-ago quarter and 20.8% sequentially.

Revenues came in at $598.4 million, which lagged the Zacks Consensus Estimate by 3.6%. Further, the top line declined 2.6% year over year or 1% on a constant-currency basis. The figure was also down 4.8% from the prior quarter.

The coronavirus pandemic, which impacted the revenues by $29 million, remained a major headwind. The outbreak led to missed shipments and logistic delays, consequently, impacting the company’s operations in the quarter review.

This led to weak performance of Device Solutions and Outcomes segments, which led to the top-line decline.

Nevertheless, the company witnessed year-over-year growth in Networked Solutions segment despite coronavirus-induced disruptions.

Further, product revenues were $528.1 million (88.3% of total revenues), down 3.1% year over year. Service revenues came in at $70.3 million (11.7%), which improved 0.8% from the year-ago quarter.

The company’s bookings were $418 million and the backlog totaled $3 billion at the end of the reported quarter.

The company has withdrawn full-year 2020 guidance owing to uncertainties related to the coronavirus pandemic.

Further, Itron is witnessing some deferred investments on a temporary basis primarily due to COVID-19. Moreover, the company has stopped production in some of its manufacturing units due to coronavirus-induced shutdown situation.

Additionally, the company is encountering suspension of deployments by local and regional governments in certain regions on account of COVID-19.

Notably, the share price of the company has plunged 16.2% following the release of the first-quarter earnings.

Further, Itron has lost 29.7% on a year-to-date basis compared with the industry’s decline of 15.8%.

Nevertheless, the company remains optimistic regarding its strategic investments toward product innovation that is likely to drive customer momentum in the near term as well as the long run.

Further, Itron’s initiatives to combat coronavirus pandemic remain noteworthy.



Segments in Detail

Device Solutions: The company generated $202.3 million revenues (33.8% of total revenues) from this segment, down 8.8% from the year-ago quarter owing to COVID-19 related delays.

Networked Solutions: Revenues from this segment came in $340.8 million (57% of total revenues), up 1.3% year over year. This can primarily be attributed to strength in AMI deployments in North America, which offset the impact of COVID-19 delays.

Outcomes: This segment generated $55.3 million revenues (9.2% of total revenues), down 1.9% on a year-over-year basis due to unfavourable timing of customer projects.

Itron, Inc. Price, Consensus and EPS Surprise

Itron, Inc. Price, Consensus and EPS Surprise

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


Operating Details

For the first quarter, Itron’s gross margin was 28.7%, which contracted 180 basis points (bps) on a year-over-year basis primarily due to manufacturing inefficiencies and unfavourable product mix. Moreover, COVID-19-related headwinds hurt gross profit by $10 million.

Non-GAAP operating expenses were $133 million, up 1.9% year over year. This increase resulted from rising product development investment.

Further, non-GAAP operating margin came in 6.4%, contracting 280 bps from the year-ago quarter. This was attributable to rising product development investment.

Balance Sheet & Cash Flows

As of Mar 31, 2020, cash and cash equivalents totaled $554.5 million, up from $149.9 million as of Dec 31, 2019. Accounts receivables were $463.6 million, down from $472.9 million in the prior quarter.

Long-term debt at the end of the first quarter stood at $1.3 billion, up from $932.5 million at the end of fourth quarter.

Itron generated $18.9 million cash from operations in the first quarter compared with $45 million in the fourth quarter.

Moreover, the company generated free cash flow of $6.3 million, down from $29 million in the last quarter.

Guidance

For second-quarter 2020, management expects non-GAAP loss within the range of 10-30 cents per share. The Zacks Consensus Estimate for second quarter earnings is pegged at 15 cents per share.

Further, the company anticipates revenues between $475 million and $500 million. The Zacks Consensus Estimate for revenues is projected at $487.25 million.

Also, free cash flow is expected in the band of ($85)-($70) million.

Zacks Rank & Key Picks

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

ASE Technology Holding Co., Ltd. ASX , Twilio Inc. TWLO and InterDigital, Inc. IDCC are some better-ranked stocks worth considering in the broader computer and technology sector, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for ASE Technology, Twilio and InterDigital is pegged at 26.63%, 26.61% and 15%, respectively.

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