Shares of Itron, Inc. ITRI hit a new 52-week low of $33.58 on Jul 2, before closing trade a notch higher at $33.68. Moreover, the stock has tumbled over 20% year-to-date due to headwinds in Europe and currency fluctuation. Volatile tax rate, increased competition and project delays also remain concerns for Itron.
The aforementioned factors led Itron to deliver weak results in the first quarter of 2015, wherein adjusted earnings of 20 cents fell short of the Zacks Consensus Estimate of 30 cents and slumped 35.5% year over year. The company’s bottom-line results were mainly impacted by unfavourable foreign currency exchange rates.
For 2015, Itron expects adjusted earnings per share in the range of $1.60 to $2.00 and revenues to be around $1.8 billion to $1.9 billion. The company is concerned that the change in exchange rates will have an impact of roughly $150 million on revenues and 20 cents on earnings per share in 2015.
Notably, slower replacement meter markets ahead of planned grid upgrades as well as macro headwinds in Europe are negatively impacting the company’s Electricity and Gas segments. In 2014, as a part of rebalancing its electricity business, Itron began phasing out its presence in certain low margin areas that are not strategic markets. This had a negative impact of $40 million in 2014 revenues. In 2015, such actions will impact revenues by an additional $40 million to $50 million.
Excluding these impacts, revenue growth in 2015 would be in the low to mid-single digits. Although, extension of the U.S. R&D tax credit in 2015 will aid EPS growth, it will remain volatile going forward because of the geographical mix of earnings and the impact of valuation allowances on overall effective tax rate. Volatile tax rate may affect Itron’s EPS growth in the future. Moreover, near-term weakness in EMEA will hurt growth.
These bearish factors have triggered a downward tendency for this Zacks Rank #4 (Sell) company’s estimates in the past 90 days. The Zacks Consensus Estimate for 2015 has decreased 2.3% to $1.67 per share and for 2016 the same went down 2% to $2.29.
Stocks to Consider
Better-ranked stocks in the same sector include Ametek Inc. AME, Advanced Micro Devices, Inc. AMD and Arista Networks, Inc. ANET. All these stocks carry a Zacks Rank #2 (Buy).
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