Itron is a leading provider of advanced metering systems and intelligent infrastructure solutions for electric, gas and water utilities worldwide
PERFORMANCE DOESN’T MATCH POTENTIAL; BUY, TARGET TO $48.00
We expect that Itron will extend its leadership in the international advanced metering market over the next few years. 2013 looks to be a transition year as a new executive strategy, enhanced R&D plan and building order pipeline are geared to show results in 2014+ time frame.
An ugly start to the year, with a more challenging macro environment (Europe), project-specific issues and restructuring actions leading to a much weaker than expected Q1. While issues persist near term (austerity, competition, etc.), core business trends stay intact (b2b 1.0x), volumes continue to rebound in April and ~$47M in buyback dry powder helps to support shares.
With management talking down (but not yet updating) the outlook, we go ahead and drop below guidance ($3.00-3.25) as shares will likely remain range-bound through the summer on this issue. We stay constructive on improved trends and cash flow metrics longer term and find the current risk/reward more favorable.
Our 2013 revenue/non-GAAP EPS estimates adjust to $2.0B/$2.85 from $2.06B/$3.05 while our 2014 estimates remain $2.18B/$3.60.
Our $48 price target (from $50) is calculated using a 7.7x EV/EBITDA multiple off of our 2014 EBITDA estimate of $286M.
Utility-centric sales cycles are long, lumpy and subject to regulatory review, along with increased competition.
- Itron Misses Q1 Earnings in Tough Start to 2013 (greentechmedia.com)
- Why Itron Shares Imploded (fool.com)