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Itron (ITRI) to Grow on Cost Saving Efforts; Risks Remain

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We issued an updated research report on Itron, Inc. (ITRI - Free Report) on Mar 15, 2017. Though the company will benefit from product development, acquisitions and restructuring strategy, its performance might be affected by negative foreign exchange rates and increased costs.

Itron’s fourth-quarter 2016 adjusted earnings registered a 51% year-over-year rise while revenues remained flat. However, the company beat the Zacks Consensus Estimate on both the counts. Moreover, Itron’s year-end backlog increased by 5% year over year to $1.7 billion. This figure excludes more than $325 million of businesses won and not yet booked by the company. Additionally, Itron announced several notable contracts that will be booked in 2017.

So far this year, the company has been realizing benefits from prior restructuring and cost savings initiatives that commenced in late 2014 as well as investment in growing its business. For 2017, Itron expects adjusted earnings per share to lie between $2.80 and $3.10. The mid-point of the guidance reflects 16% year-over-year growth.

Revenues are projected to range between $1.9 and $2.0 billion, the mid-point of which depicts a 3% decline from 2016. The company expects currency to have a significant unfavorable effect year over year on revenue.

Itron will continue to face temporary redundant costs in product development and general & administrative expense while executing restructuring plans. While these restructuring efforts will result in savings, higher expenses may hurt income in the near term. Increased competition also remains a headwind for the company in the near term.

Nevertheless, Itron expects to grow through a combination of new product development, licensing technology, distribution agreements, partnership arrangements and acquisitions. The company believes that these activities will be funded from existing cash, cash flow from operations, borrowings, or the sale of common stock.

Itron remains focused on its ongoing efforts to drive operational improvements as well as product development and supply chain efficiencies across businesses. Looking ahead, the company is confident that investments in OpenWay Riva IoT solution along with differentiated software and services offerings, combined with on-going operational discipline, will help drive continued growth and profitability.



In the past one year, Itron outperformed the Zacks categorized Electronics Testing Equipment subindustry. The company’s shares gained around 52.9% during this period, compared with roughly 43.6% increase recorded by the industry.

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

Stocks to Consider

Some better-ranked stocks in the same space include Applied Optoelectronics, Inc. (AAOI - Free Report) , Teradyne, Inc. (TER - Free Report) and Cognex Corporation (CGNX - Free Report) . Applied Optoelectronics has delivered an impressive average positive earnings surprise of 116.49% in the past four quarters and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Teradyne generated a positive average earnings surprise of 24.85% in the trailing four quarters and flaunts a Zacks Rank #1.

Cognex Corporation has a positive average earnings surprise of 28.40% in the last four quarters and carries a Zacks Rank #2 (Buy).

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