) dropped 9% since it reported a 33% year-over-year decline in
its third-quarter 2013 adjusted earnings to 65 cents per share on
Oct 30. Lower revenues and the consequent drop in gross profit
led to the decline. Adjusted earnings fell short of the Zacks
Consensus Estimate of 68 cents a share.
Including restructuring charges, acquisition-related expenses and
amortization of intangible assets and debt fees, the company
reported a loss per share of 19 cents per share compared to the
year-ago earnings per share of 89 cents.
Total revenue fell 1.7% year over year to $495 million, missing
the Zacks Consensus Estimate of $513 million. Unfavorable foreign
currency exchange and lower revenues from the Energy Segment
dragged down overall revenues in the quarter.
Cost of goods sold increased 4% year over year to $345 million.
Gross profit dropped 13% to $150 million. Consequently, gross
margin contracted 380 basis points (bps) to 30.3%. The
year-over-year decline was due to increased costs on an OpenWay
project in North America, lower volumes and the impact of product
Adjusted operating expenses remained flat at $117 million as
lower global sales, and marketing and product development
expenses were partially offset by higher general and
administrative expenses primarily due to legal reserves.
Adjusted operating profit declined 39% year over year to $32.9
million due to lower gross profit. Including one-time items,
Itron reported an operating loss of $6.5 million in the reported
quarter compared to an operating income of $46 million in the
Energy Segment: Net sales at the Energy Segment dropped 4.7% year
over year to $360 million. Adjusted operating income for the
quarter was $22.8 million compared with $40.8 million in the
Water Segment: The Water Segment reported sales of $135 million
in the quarter, up 7.2% from $126 million in the year-ago
quarter. Adjusted operating income for the quarter was $22.2
million compared with $20.5 million in the year-ago quarter.
As of Sep 30, 2013, cash and cash equivalents amounted to $122
million versus $136 million as of Dec 31, 2012. Cash flow from
operating activities was $66 million in the nine-month period
ended Sep 30, 2013, compared with $137 million in the prior-year
comparable period. The debt-to-capitalization ratio declined to
28.7% as of Sep 30, 2013 from 29.6% as of Dec 31, 2012. Free cash
flow for the quarter was $31 million compared with $34 million in
the third quarter of 2012.
During the reported quarter, Itron repurchased 174,200 shares for
$7.4 million. In March, Itron's board authorized a new 1 year
share repurchase plan for up to $50 million. Itron has
repurchased 559,000 shares under this plan for an average price
of $42 per share. The company currently has $26 million available
under this plan.
Bookings and Backlog
Itron had bookings of $457 million in the quarter, reflecting a
book-to-bill ratio of 0.9:1. The largest booking during the
quarter was $61 million related to CenterPoint Energy's smart gas
module deployment. Total backlog at the end of the quarter was
Given the weak third quarter results and continuing softness in
Europe, Itron expects revenues to be at the lower end of the
guidance range of $1.95-$2 billion. The company also forecasts
earnings to be at the lower end of its previously stated guidance
range of $2.25-$2.55 per share.
Itron will benefit from the continuous focus on lowering costs,
reducing capital expenditure and working capital balance. A
strong backlog, new contracts, flexible business operation and
expansion in emerging markets will drive long-term growth.
However, the company continues to face competitive environment in
the U.S. for water and gas metering markets as increasing number
of vendors are focusing on these segments to offset softer
electric AMI markets. The shift in product mix and lower volume
will act as headwinds in the upcoming quarters.
Liberty Lake, Wash.-based Itron Inc., along with its
subsidiaries, is one of the principal technology providers to the
energy and water industries worldwide. It produces electricity,
gas, water, and heat meters, data collection and utility software
solutions along with various other associated metering products
for residential, commercial and industrial, and transmission and
One of Itron's peers,
) reported third quarter earnings of 23 cents per share, up 14%
from 19 cents earned in the year-ago quarter, a penny ahead of
the Zacks Consensus Estimate of 22 cents.
Itron currently retains a Zacks Rank #3 (Hold). For investors
keen on this industry, we recommend
Agilent Technologies Inc.
), both carrying a Zacks Rank #2 (Buy).
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ITRON INC (ITRI): Free Stock Analysis Report
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