Itron (ITRI) Tops Q2 Earnings And Revenues, Guides 2016

Shares of Itron, Inc. (NASDAQ:ITRI) gained roughly 4.8% to close at $53.39 on Friday after the company posted upbeat second-quarter 2016 results. The company reported adjusted earnings of 65 cents per share, as against a loss of 39 cents a share recorded in the year-ago quarter. Earnings per share surpassed the Zacks Consensus Estimate of 40 cents.

Including one-time items, the company reported earnings of 52 cents per share as against a loss of 37 cents per share in the year-ago quarter.

Operational Update

Total revenue jumped 9% to $513 million from $470.8 million in second-quarter 2015. Revenues also surpassed the Zacks Consensus Estimate of $469 million. Foreign currency exchange rates had an unfavorable impact of around $7 million on revenues. Excluding the foreign currency impact, revenues were up 10% year over year, driven primarily by growth in all segments, particularly in the Electricity and Gas segments.

Cost of goods sold dropped 2.6% to $343 million from $352 million in the prior-year quarter. Gross profit increased 43% year over year to $169.7 million. Gross margin expanded 800 basis points to 33%, driven by lower warranty expense, favorable product mix and operational efficiencies.

Adjusted operating expenses increased 3.7% year over year to $128 million, due to higher general and administrative costs for professional fees associated with the review of software-related revenue recognition and revision of previously issued financial statements. Itron posted adjusted operating income of $41.6 million against a loss of $4.9 million in the year-ago quarter, supported by the robust performance in revenue and gross margin.

Segment Performance

Electricity Segment: Net sales at the Electricity segment escalated 14% year over year to $232.8 million in second-quarter 2016. The segment reported adjusted operating income of $23 million that surged significantly from $1.1 million in the year-ago quarter.

Gas Segment: The segment’s sales rose 7.9% year over year to $150.3 million. Adjusted operating income was $27 million, marking a 75.9% year-over-year surge.

Water Segment: The Water segment reported sales of $129.9 million, up 2.2% from $127 million in the prior-year quarter. The segment reported adjusted operating profit of $15.7 million, reversing from a loss of $9.9 million posted in the year-ago quarter.

Financial Position

Itron ended the quarter with cash and cash equivalents of $132 million compared with $131 million as of 2015 end. The company generated cash flow from operations of $51.1 million for the six-month period ended Jun 30, 2016 compared with $17.6 million in the comparable year-ago period.

Bookings and Backlog

Itron had bookings of $394 million in second-quarter 2016. The company reported 12-month backlog of $688 million and total backlog of $1.3 billion during the quarter.

Outlook

Itron projects 2016 revenues to be in the range of $1.95−$2 billion. The company expects full-year 2016 EPS to be in the band of $2.20−$2.45. The guidance assumes current currency exchange rates for the remainder of the year, average shares outstanding of approximately 38 million for the year and a non-GAAP effective tax rate for the year of approximately 37%.

Itron remains focused on its ongoing efforts to drive operational improvements as well as product development and supply chain efficiencies across businesses. Accordingly, the company announced new restructuring projects to further reduce expenses through streamlining global operations. It expects to achieve additional annualized cost savings of approximately $40 million from these projects by 2018 end.

Zacks Rank

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

Some better-ranked stocks in the sector are Cognex Corp. (NASDAQ:CGNX) , Benchmark Electronics Inc. (NYSE:BHE) and Advanced Energy Industries, Inc. (NASDAQ:AEIS) . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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