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Itron Inc. (ITRI - Analyst Report) reported first quarter results, registering a GAAP EPS of 66 cents versus 62 cents during the year-earlier quarter. Included in the first quarter results was a benefit of 26 cents toward tax benefits. Excluding these, the adjusted EPS amounted to 99 cents versus 98 cents during the year-ago quarter. Earnings were at par with the Zacks Estimate of 99 cents.

Net sales as reported by the company increased 13.3% to $563.7 million from $497.6 million in the year-earlier quarter, outperforming the Zacks Estimate of $548 million. The revenue mainly improved due to the global success of the company’s advanced solutions for electric, gas and water utilities. The company also reported its quarterly booking of $681 million which included $268 million or a contract with BC Hydro for end-to-end metering solutions. The company also ended the quarter with a total backlog of $1.75 billion.

Cost and Margins

Cost of sales amounted to $379.6 million versus $340.6 million during the year-ago quarter. Gross profit for the first quarter totaled $184.1 million versus $157.1 million, thereby expanding the gross margin by 110 basis points year over year to 32.7% during the quarter.

Selling, general and administrative expenses amounted to $78 million versus $74.6 million during the year-earlier quarter.

Operating income as reported by the company was $50.1 million versus $31.2 million during the prior-year quarter. Consequently, operating margin also increased 265 basis points year over year to 9% in the quarter.

Financial Update

Cash and cash equivalents of the company amounted to $133.4 million as of March 31, 2011 versus $169.5 million as of December 31, 2010.

Long-term debt of the company reduced to $341.6 million as of March 31, 2011 from $382.2 million as of December 31, 2010.

Debt-to-capitalization ratio of the company improved to 18% as of March 31, 2011 from 23.4% as of December 31, 2010 and 21.1% as of September 30, 2010.

Operating cash flow as reported by the company decreased to $36 million during the quarter from $65.8 million during the year-earlier quarter.

The technology-based advanced metering infrastructures (AMI) and automated meter reading (AMR) markets have very bright growth prospects  for Itron. Two driving forces facilitating AMI and AMR growth are the cost reduction strategies implemented by almost all the companies to deal with the economic recession and the other is its slow recovery, necessitating efficient allocation of energy supply to meet the increasing demand.

We currently have a Zacks #3 Rank (short-term Hold recommendation) on the stock.

Itron is a leading technology provider to the global energy and water industries. It is the world's leading provider of 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 - Analyst Report) and Roper Industries Inc. (ROP - Snapshot Report).

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