) gained over 9% and closed at $39.38 on Aug 6, a day after the
company reported its second-quarter 2014 results. Adjusted earnings
declined 7% year over year to 54 cents per share in the reported
quarter, impacted by higher effective tax rate. However it came
ahead of the Zacks Consensus Estimate of 36 cents.
Including one-time items such as amortization, restructuring and
acquisition-related expenses, the company reported earnings of 49
cent per share, which improved 58% from the year-ago quarter.
Total revenue increased 1.5% year over year to $489 million and
surpassed the Zacks Consensus Estimate of $464 million.
Year-over-year revenue growth was driven by improvement in the
Water and Gas segments, which more than offset a decrease in the
Cost of goods sold went up 1.2% year over year to $326 million.
Gross profit rose 2.2% to $163 million from $160 million in the
year-ago quarter. Consequently, gross margin increased 20 basis
points (bps) to 33.3%.
Adjusted operating expenses remained flat year over year at $127
million. Adjusted operating profit increased 11.5% year over year
to $35 million. Itron reported an operating profit of $31.9 million
in the reported quarter compared with $18 million in the year-ago
Itron, Inc - Earnings Surprise |
Net sales at the Electricity Segment decreased 14% year over year
to $183.8 million compared with the year-ago quarter. The segment
reported an adjusted operating loss of $2.9 million for the quarter
compared with an adjusted operating profit of $3 million in the
The segment's sales rose 13.5% year over year to $154 million.
Adjusted operating income for the quarter was $27.5 million, up
25.9% from $21.9 million in the year-ago quarter.
The Water Segment reported sales of $151 million in the quarter, up
14% from $132.5 million in the prior-year quarter. Adjusted
operating income for the quarter was $23 million, a 25.7% jump from
$18.5 million in the year-ago quarter.
Itron ended the quarter with cash and cash equivalents of $114.8
million versus $124.8 million as of 2013-end. Cash flow from
operating activities for the period of six months ended Jun 30,
2014 was $67 million compared with $19 million in the year-ago
The debt-to-capitalization ratio was 27% as of Jun 30, 2014 against
30.3% as of Dec 31, 2013. Free cash flow in the reported quarter
was negative $10 million, compared with a positive $4 million in
the second quarter of 2013 impacted by increased working capital.
During the quarter, the company repurchased 107,477 shares for
about $42 million. The repurchases were made under the $50 million
share repurchase program authorized by board of directors for a
12-month period beginning Mar 2013. Itron also repaid debt of about
$20 million during the quarter.
Bookings and Backlog
Itron had bookings of $478 million in the quarter. Total backlog
increased 25% year over year and came in at $1.3 billion at the
Itron expects full year 2014 revenues to be in the range of
$1.9-$1.975 billion. The company projects 2014 earnings per share
to be between $1.50 and $1.80. Itron anticipates gross margin of
approximately 31% to 32%.
The company is progressing on restructuring projects announced in
2013, including plan to reduce workforce by 9%. During the reported
quarter Itron reassessed certain restructuring actions and
completed about 75% of workforce reduction. It will result in an
annualized savings of about $30 million once complete.
On Aug 5, Itron announced that the city of Bismarck, North Dakota
has selected Itron to help modernize its water distribution system.
The city purchased Itron's AMI solution, Itron analytics and
services. They will share the Itron fixed network installed at
Montana Dakota Utilities Company, which provides a cost effective
solution for both utilities. This along with the prior contracts
will strengthen the company's backlog bringing in stability in its
We believe that Itron will benefit from its consistent focus on
lowering costs and capital expenditure. Moreover, a strong backlog,
new contracts, flexible business operations and expansion in
emerging markets are likely to drive long-term growth.
Itron's growth mainly depends on leveraging smart technologies and
data expertise through innovative new software and services which
will help in increasing payback opportunities for utilities to
deploy smart systems, by helping them to unlock more value from the
data. Itron's continuous focus on addition of new software and
services will drive high margin revenue stream in addition to core
metering and network product revenues.
However, software and services business forms less than 10% of
Itron's total revenues as of now; yet the company remains
optimistic about the expansion opportunity of this business
organically with targeted M&A.
Itron is well positioned to benefit from its Gas and Water segments
which are performing very well along with displaying prospects of
betterment in the future. However, the Electricity business is
operating in a challenging environment and remains a matter of
Liberty Lake, WA-based Itron Inc., along with its subsidiaries, is
one of the principal technology providers to energy and water
industries worldwide. It produces electricity, gas, water and heat
meters, data collection and utility software solutions as well as
various other associated metering products. The company provides
its services to residential, commercial and industrial customers,
along with transmission and distribution customers.
Itron currently carries a Zacks Rank #3 (Hold). Some better-ranked
stock in the electrical test equipment sector include Agilent
Technologies Inc. (
), Cognex Corporation (
) and National Instruments Corporation (
). All these stocks carry a Zacks Rank #2 (Buy).
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