) third-quarter 2012 adjusted earnings were 97 cents per share
compared with 92 cents in the year-earlier quarter. Adjusted
earnings surpassed the Zacks Consensus Estimate of 94 cents per
ITRON INC (ITRI): Free Stock Analysis Report
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Including amortization expenses, restructuring costs and
acquisition related expenses, earnings in the quarter were 89
cents per share compared with the year-ago quarter's loss of
Total revenues during the quarter fell 18.1% to $504.1 million,
lagging behind the Zacks Consensus Estimate of $525 million. The
decline in revenues stemmed mainly from an unfavorable $35
million impact from foreign currency translation and a further
$76 million from the completion of many OpenWay projects in North
America. Moreover, the Water segment's higher revenues were
offset by lower gas module shipments in North America and lesser
shipments of Energy products in Asia Pacific.
Cost and Margins
Cost of goods sold declined 24.2% to $332.3 million. Gross profit
also dropped 2.9% to $171.8 million. However, gross margin
expanded 530 basis points to 34.1%. The improvement was driven by
lower warranty costs at the Energy and Water segments, along with
benefits from restructuring actions as well as manufacturing
efficiencies, offsetting the negative impacts of lower volumes.
Adjusted operating expenses increased 0.7% to $117.6 million in
the quarter. Expenses increased due to sales and marketing
efficiencies, along with product development initiatives.
Adjusted operating profit declined 10% to $54.2 million.
Including one-time items, operating income was $46 million in the
reported quarter compared to an operating loss of $497.3 million
in the year-ago quarter.
Cash and cash equivalents decreased to $91.5 million as of
September 30, 2012, from $133.1 million as of December 31, 2011.
Cash from operations decreased to $137 million for the first nine
months of 2012 from $153.8 million in the year-ago comparable
period. The debt-to-capitalization ratio improved to 30.2% as of
September 30, 2012, compared to 33% as of June 30, 2012, and
33.3% as of December 31, 2011.
During the quarter, Itron repurchased 342,415 shares of its
common stock at an average price of $43.00 per share. The company
has repurchased approximately 1.9 million shares of Itron common
stock at an average price of $37.55 per share since the inception
of the program, representing 4.6% of total shares outstanding as
of October 2011.
The company has narrowed its revenue guidance to the range of
$2.1 billion to $2.15 billion from $2.1-$2.2 billion for 2012.
Similarly, it now expects the adjusted earnings to lie within the
band of $3.60-$3.80, down from the previous range of $3.80-$4.00
per share for 2012.
Itron aims at upgrading its smart meter platform in the global
arena. Recently, the company won the nation's largest gas
metering contract from Southern California Gas Company, a
The company is undertaking restructuring initiatives to increase
its efficiency and lower manufacturing costs. It anticipates
annualized cost savings of $15 million in 2012, which is expected
to further increase to $30 million in 2013.
But at the same time, Itron expects to book associated pre-tax
charges in the range of $75-$80 million, a major portion of which
will be incurred in 2012. Therefore, higher operating
expenses are likely to create margin headwinds in 2012 and first
half of 2013. Moreover, the competition of the OpenWay projects
is expected to impact revenues negatively in the next three
Itron has a short-term Zacks #3 (Hold) Rank. We have a long-term
Neutral recommendation on the stock.