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Itron (ITRI) Q3 Earnings & Revenues Lag on Shipment Delays

Itron, Inc.’s ITRI third-quarter 2017 adjusted earnings of 77 cents per share remained flat year over year. Earnings, however, missed the Zacks Consensus Estimate of 89 cents. Results bore the impact of delay in shipments due to short-term issues related to factory consolidation, supply chain transitions and ramped-up deliveries of new solutions. These steps were carried out by Itron in a bid to improve operational efficiencies and transform its business.

Including one-time items, the company reported earnings of 65 cents per share compared to a loss of 26 cents per share witnessed in the prior-year quarter.

Total revenues decreased around 3.9% year over year to $487 million due to temporary operational issues primarily in North America and dragged delays of Water projects in the company’s Europe, Middle East and Africa (EMEA) and North American regions. Revenues also fell short of the Zacks Consensus Estimate of $525 million.

Itron, Inc. Price, Consensus and EPS Surprise

 

Itron, Inc. Price, Consensus and EPS Surprise | Itron, Inc. Quote

Operational Updates

Cost of goods sold went down 4.4% to $321.4 million from $336 million recorded in the year-earlier quarter. Gross profit declined 3% year over year to $165.3 million. Gross margin expanded 30 basis points (bps) year over year to 34%, driven by higher Electricity and Water segment margins resulting from favorable product mix and lower warranty costs.

Adjusted operating expenses declined 2.5% year over year to $116 million, due to lower professional services fees, variable compensation, and reduced general and administrative headcount.

Itron posted adjusted operating income of $50 million compared with $52 million recorded in the year-ago quarter. Operating margin advanced 40 bps to 10.7% in the quarter.

Segment Performance

Electricity Segment: Net sales at the Electricity segment edged down 1% year over year to $240 million in second-quarter 2017 due to the operational issues in North America. The segment reported adjusted operating income of $25.2 million, declining 12.8% from $28.9 million witnessed in the comparable quarter last year.

Gas Segment: The segment’s sales dropped 9% year over year to $131.8 million affected by operational issues in North America and lower EMEA Gas project revenues compared with record communication module deliveries in the prior year. Adjusted operating income came in at $20.7 million, plunging 29.6% year over year.

Water Segment: The Water segment reported sales of $114.8 million, down 4% from $120 million recorded in the year-earlier quarter. Lower revenues in North America and the EMEA regions were partially offset by growth in Latin America and Asia Pacific. The segment reported adjusted operating profit of $14.3 million, surging 40% from $10.2 million posted in the year-ago quarter.

Financial Position

Itron had cash and cash equivalents of $137.6 million at the end of third-quarter 2017 compared with $133.6 million at the end of 2016. The company recorded cash from operations of $114.5 million for the nine-month period ended Sep 30, 2017, compared with $81.9 million recorded in the prior-year period.

Free cash flow was $9 million for the third quarter compared with $20 million in the comparable period last year. The downside primarily stemmed from changes in working capital due to the timing of accounts payables and larger tax payments compared with the previous year quarter.

Bookings and Backlog

Itron had bookings of $343 million in the third quarter. The company’s backlog came in at $1.5 billion, flat with the year-ago quarter tally. Also, its 12-month backlog totaled $847 million, up 15.9% from the third-quarter 2016 level.

Guidance

Itron updated its full-year 2017 guidance. The company anticipates 2017 adjusted earnings per share to be at or above the lower-end of the previous guidance range of $2.95-$3.15. It also estimates revenues to be at or modestly below the lower-end of the prior projection of $2.03-$2.06 billion.

Share Price Performance

In the past year, Itron has underperformed the industry it belongs to. The company’s shares have gained around 14.3% compared with 60.6% growth recorded by the industry.



Zacks Rank & Key Picks

Itron currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the same industry are Agilent Technologies, Inc. A, Fortive Corporation FTV and Teradyne, Inc. TER. All three stocks sport a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Agilent Technologies has an expected long-term earnings growth rate of 9.8%.

Fortive Corporation has an expected long-term earnings growth rate of 10.1%.

Teradyne has an expected long-term earnings growth rate of 12%.

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