Itron, Inc.
(
ITRI
) has reported first quarter of 2012 results, delivering adjusted
earnings per share (
EPS
) of 91 cents, an 8% drop from 99 cents in the year-earlier
quarter. Adjusted earnings also fell short of the Zacks Consensus
Estimate of 93 cents per share. The earnings shortfall was mainly
due to escalating operating expenses in the quarter.
Including amortization expenses, restructuring costs and
acquisition related expenses, EPS in the quarter was 63 cents
compared with 66 cents in the year-ago quarter.
Total revenue during the quarter inched up 1% to $571.6 million
compared with $563.7 million in the prior-year quarter driven by
growth at both the Energy and Water segments. However, changes in
foreign currency exchange rates had an unfavorable impact on
revenues of $13 million.
Total revenue comfortably surpassed the Zacks Consensus Estimate
of $546 million. Growth at the Energy segment was mainly due to
increased smart gas module shipments in North America and increased
electric product shipments in Europe and Asia-Pacific. More meter
shipments in Latin America and Europe drove growth at the Water
segment.
Cost and Margins
Costs of goods sold increased 3% to $388 million from $379
million in the year-ago quarter. Gross profit declined 1% to $183
million from $185 million in the prior-year quarter. However, gross
margin contracted 80 basis points to 32%. Excluding the impact of a
gain from a recovery of a warranty claim in the year-ago quarter,
gross margin expanded 70 basis points.
Adjusted operating expenses increased 8% to $129 million in the
quarter. Expenses increased due to sales and marketing initiatives
at the Energy and Water segments, increased product research and
development at the Energy segment and higher corporate general and
administrative costs, including acquisition-related expenses
related to the SmartSynch acquisition which is anticipated to close
in early May.
Adjusted operating profit was $54.3 million versus $65.7 million
in the year-earlier quarter. Including one-time items, operating
income decreased to $39.6 million in the reported quarter from
$50.1 million in the year-ago quarter.
Financial Position
As of March 31, 2012, cash and cash equivalents increased to
$154.4 million from $133.1 million as of December 31, 2011. Cash
from operations increased to $54 million in the quarter from $36
million in the year-ago comparable period. The
debt-to-capitalization ratio as of March 31, 2012 improved to 31%
from 33% as of December 31, 2010.
During the quarter, Itron repurchased 282,090 shares of its
common stock at an average price of $37.56 per share. The company
has repurchased approximately 1.1 million shares of Itron common
stock at an average price of $36.20 per share since inception of
the program, representing 2.7% of total shares outstanding as of
October 2011.
Our Take
Itron's acquisition of SmartSynch, a smart grid solutions
provider that uses cellular network for communications, will enable
it to strengthen its position in the integrated cellular network
market and provide customers with a wider choice across the smart
metering spectrum. The complementary technology of Itron and
SmartSynch can be used in areas where RF mesh networks are not
available or are unaffordable.
Moreover, SmartSynch's technology will cater to the demand of
full cellular smart-grid network deployments, like the 1.9 million
electric residential and commercial & industrial meter
end-point deployment at Consumers Energy.
The restructuring initiatives adopted by the company in the
manufacturing segment in order to reduce cost and increase
efficiency will enable Itron to seize international global
opportunities more efficiently. However, the charges associated
with the restructuring may put pressure on margins through 2012 and
the first half of 2013. We currently have a Zacks #3 Rank
(short-term Hold recommendation) on the stock.
Itron provides leading technology to the global energy and water
industries. It is a world leader in intelligent metering, data
collection and utility software solutions, with nearly 8,000
utilities worldwide relying on its technology to optimize the
delivery and use of energy and water. It competes with the likes of
General Electric Co.
(
GE
) and
Roper Industries Inc.
(
ROP
).
GENL ELECTRIC (
GE
): Free Stock Analysis Report
ITRON INC (
ITRI
): Free Stock Analysis Report
ROPER INDS INC (
ROP
): Free Stock Analysis Report
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