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Itron (ITRI) Tops Q4 Earnings & Revenues, Guides for 2018

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Itron, Inc. (ITRI - Free Report) reported fourth-quarter 2017 adjusted earnings of $1.01 per share, which increased 48.5% year over year and surpassed the Zacks Consensus Estimate of 94 cents. The improvement reflects higher operating income and lower tax expenses related to tax audit settlements.

Including one-time items, the company posted earnings per share of 5 cents compared with 30 cents in the prior-year quarter.

Total revenues increased around 11% year over year to $551 million driven by strong smart solution business and managed services. The top line also came ahead of the Zacks Consensus Estimate of $536 million.

Itron, Inc. Price, Consensus and EPS Surprise

 

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

Operational Updates

Cost of goods sold was up 11% to $339 million from $311 million in the year-earlier quarter. Gross profit increased11.4% year over year to $174.8 million. Gross margin expanded 10 basis points (bps) year over year to 31.7% driven by higher volume and mix of smart solutions, primarily in the Electricity segment, offsetting lower gross margins in the Gas and Water segments.

Operating expenses increased1.3% year over year to $127.6 million. Itron posted adjusted operating income of $55 million compared with $45 million in the year-ago quarter. Operating margin advanced 90 bps to 10% in the quarter.

Segment Performance

Electricity Segment: Net sales at the Electricity segment increased 20% year over year to $293.7 million in fourth-quarter 2017 courtesy of higher smart solution deliveries, primarily in North America and Europe, Middle East and Africa (EMEA) regions. The segment reported operating income of $41.9 million, which improved significantly from $17.2 million in the comparable quarter last year.

Gas Segment: The segment’s sales upped 2% year over year to $138.9 million owing to a favorable impact from changes in foreign currency exchange rates. Operating income came in at $16.4 million, which declined9% year over year.

Water Segment: The Water segment’s sales of $118 million, was up 3% from $114 million in the year-earlier quarter. The segment reported operating profit of $4.3 million, which decreased significantly from $8.6 million in the year-ago quarter.

2017 Performance

In 2017, Itron reported adjusted earnings per share of $3.06, up 20.5% year over year. The bottom line also exceeded the Zacks Consensus Estimate of $2.99. Including one-time items, the company reported earnings per share of $1.45 compared with 82 cents in the prior year.

Revenues in 2017 inched up 0.2% year over year to $2,018 million compared with $2,013 million last year. The top line outpaced the Zacks Consensus Estimate of $2,006 million.

Financial Update

Itron recorded cash and cash equivalents of $176.3 million as of Dec 31, 2017, up from $133.6 million as of Dec 31, 2016. Cash flow from operations came in at $191 million in 2017 compared with $116 million in 2016. Free cash flow was $61 million for the fourth quarter, higher than $21 million in the comparable period last year.

Bookings and Backlog

In the quarter under review, Itron’s bookings totaled $811 million. The company’s backlog came in at $1.8 billion and increased 6% year over year. Also, its 12-month backlog came in at $931 million, up 22% from the fourth-quarter 2016 level.

Guidance

For 2018, Itron anticipates adjusted earnings per share in the range of $2.95-$3.35. It also expects revenues to lie with the $2.33-$2.43 billion band. For first-quarter 2018, the company envisions adjusted earnings per share between 10 cents and 15 cents. Revenues are projected in the range $575-$600 million for the same time period. Additionally, Itron confirmed that the Silver Spring Networks ’acquisition might be accretive to gross margin in 2018 and is likely to boost EPS and adjusted EBITDA in 2019.

Share Price Performance

In the past year, Itron has underperformed the industry it belongs to. The company’s shares have gained around 25.7% compared with the industry’s rally of 37%.

Zacks Rank &Stocks to Consider

Itron has a Zacks Rank #5 (Strong Sell).

Better-ranked stocks in the same sector are Teradyne, Inc. (TER - Free Report) , AMETEK, Inc. (AME - Free Report) and Fortive Corporation (FTV - Free Report) . While Teradyne sports a Zacks Rank #1 (Strong Buy), AMETEK and Fortive carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Teradyne has a long-term earnings growth rate of 12%. Its shares have gained 25.4%, over the past six months.

AMETEK has a long-term earnings growth rate of 11.5%. The company’s shares have rallied 17.3% during the same time frame.

Fortive has a long-term earnings growth rate of 9.7%. The stock has gained 14.7% in six months’ time.

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