Itron Stock Soars 36.1% YTD: Will the Rally Continue?

Itron Inc's ITRI shares have been performing well on the trading front with a gain of 36.1% year to date compared with 15.2% and 6.8% growth of the S&P 500 composite and the sub-industry, respectively.
Headquartered in Liberty Lake, WA, Itron is one of the leading global suppliers of a wide range of standard, advanced and smart meters and meter communication systems. It also provides networks and communication modules, software, services and sensors for the effective management of electricity, gas and water resources for consumers.
Solid financial performance is driving a good run on the trading front. The company's earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 77.9%.

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Catalysts Driving Performance

Itron's performance is gaining from higher recurring and one-time service revenues, communication module sales, improved component supply and sales of water meters. 
Momentum in the Grid Edge Intelligence platform augurs well. The platform's growth is being driven by various factors including data center-related demand growth, reindustrialization and production localization, as well as electrification of transportation and homes. Itron added that automation of water infrastructure, safety applications for gas customers and the digitalization of its operations were other growth drivers.
Also, the acquisition of Elpis Squared expanded the Grid Edge Intelligence platform's solutions. Management noted that customers are increasingly deploying new digital technology and non-wires grid solutions. This represents a strong opportunity for ITRI. Increased demand for electric vehicles and distributed energy resources is expected to drive customer bookings.
Bookings were $361 million and the backlog amounted to $4.3 billion at the end of the reported quarter. ITRI continues to anticipate 2024 bookings to result in a book-to-bill ratio of at least 1:1.
Non-GAAP earnings per share came in at $1.24, which surpassed the Zacks Consensus Estimate by 45.9%. The company reported EPS of 49 cents in the prior-year quarter.
Revenues of $603 million beat the Zacks Consensus Estimate by 4.1%. The top line improved 22% (up 22% at constant currency) year over year.
The top-line performance was driven by strong operational execution and robust demand trends across all business segments. Conversion of previously constrained revenues benefitted the first-quarter revenues, with the remaining $40 million expected to be delivered in the second quarter.

Robust Outlook

For the second quarter of 2024, ITRI expects revenues in the range of $595-$605 million. Non-GAAP EPS is anticipated between 90 cents and $1.00.
In the prior-year quarter, the company had reported revenues of $541.1 million and EPS of 65 cents.
The Zacks Consensus Estimate for ITRI's current quarter revenues is pegged at $599 million, indicating year-over-year growth of 10.7%. The consensus estimate for EPS is pegged at 94 cents, expecting to rise 44.6% from the prior-year actuals.

Estimates Northward Bound

The Zacks Consensus Estimate for ITRI's 2024 and 2025 revenues is pegged at $2.36 billion and $2.49 billion, indicating growth of 8.8% and 5.3% from the year-ago levels, respectively.
The consensus estimate for fiscal 2024 and 2025 EPS is expected to rise 19% and 9.5% from the prior-year actuals of $4.00 and $4.38, respectively.
The consensus mark for fiscal 2024 and 2025 EPS has increased 10.8% and 2.6%, respectively, in the past 60 days, reflecting analysts' optimism.
ITRI's long-term earnings growth rate is pegged at 26%.

Headwinds Persist

However, rising operating expenses and stiff competition amid a soft macroeconomic backdrop are concerning for this Zacks Rank #3 (Hold) stock. 

In 2023, total operating expenses increased 10.5% to $585 million. In the first quarter of 2024, non-GAAP operating expenses of $138.1 million jumped 10.4% year over year, primarily due to higher sales, and general and administrative costs. These factors might exert pressure on the margins, at least in the near term.
Itron also has a leveraged balance sheet. As of Mar 31, 2024, the company's cash and cash equivalents totaled $300.6 million. Long-term debt at the end of the first quarter of 2024 was $455.4 million.

Stocks to Consider

Some better-ranked stocks worth consideration in the broader technology space are Alphabet GOOGL, Arista Networks ANET and Woodward WWD, currently sporting a Zacks Rank #1 (Strong Buy) each.
The Zacks Consensus Estimate for Alphabet's 2024 EPS is pegged at $7.60, up 12.1% in the past 60 days. GOOGL's earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 11.3%. The long-term earnings growth rate is 17.5%. Shares of GOOGL have risen 45.2% in the past year.
The Zacks Consensus Estimate for Arista Network's 2024 EPS is pegged at $7.92, up 5.7% in the past 60 days. The long-term earnings growth rate is 15.7%. ANET's earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 15.4%. Shares of ANET have gained 124.6% in the past year.
The Zacks Consensus Estimate for Woodward's fiscal 2024 EPS has increased 11.6% in the past 60 days to $5.88. WWD earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 26.1%. The long-term earnings growth rate is 16.5%. Shares of WWD have risen 58.3% in the past year.

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