On Sep 27, we upgraded our recommendation on
), a technology provider to the energy and water industries, to
Neutral. While the company may face a more challenging
competitive environment in the U.S., it will benefit from its
strong backlog, new contracts and cost reduction initiatives.
Why the Upgrade?
On Jul 31, Itron reported second-quarter 2013 adjusted earnings
of 58 cents per share, down 50% year over year. Adjusted earnings
fell short of the Zacks Consensus Estimate of 60 cents.
Revenues also fell 17% year over year to $482 million due to
lower revenues from the Energy Segment, missing the Zacks
Consensus Estimate of $493 million.
Itron, a Zacks Rank #3 (Hold) stock, remains committed to cost
reduction initiatives. In Sep 2013, Itron announced restructuring
plans that include cutting of 750 jobs, or 9% of its workforce
and closure of several facilities. The company expects to
generate cost savings of about $30 million a year from the move.
These actions will drive Itron's operational efficiency and boost
For the second half of this year, volume increment will be driven
by Itron's consistent focus on expansion of its gas smart payment
meter project in Azerbaijan and continuation of the Italgas smart
In addition, Itron's bookings in the second-quarter 2013 grew 15%
from last year, the highest level in six quarters, representing a
book-to-bill ratio of 1.1. During the quarter, Itron's largest
booking was $94 million related to Duquesne Light's Smart
Metering project. Positive bookings growth with some good wins
including Irish Water will support long-term growth.
However, Itron lowered its 2013 revenue guidance to $1.95-$2
billion from $2-$2.1 billion and earnings to $2.25-$2.55 per
share from $3.00-$3.25 per share due to a lower-than-expected
pace in gas meter deployment as a result of the sluggish business
environment in EMEA and product mix in North America.
Additionally, the company will continue to face a more challenged
competitive environment across water and gas metering markets in
the U.S. Delay in contracts and expense escalation might create
problems in future. Moreover, shift in product mix, lower volume
will act as headwinds in the upcoming quarters.
Other Stocks to Consider
Logitech International SA
Planar Systems Inc.
), both carrying a Zacks Rank #1 (Strong Buy), and
) with a Zacks Rank #2 (Buy) are performing well in computer and
technology sector and are worth considering.
COGNEX CORP (CGNX): Free Stock Analysis
ITRON INC (ITRI): Free Stock Analysis Report
PLANAR SYSTEMS (PLNR): Free Stock Analysis
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