Itron, Inc. ITRI reported adjusted earnings of 68 cents per share in fourth-quarter 2016, a 51% rise from 45 cents in the year-ago quarter. Earnings per share surpassed the Zacks Consensus Estimate of 57 cents by a margin of 19%.
Including one-time items, the company reported earnings of 30 cents per share, a 30% increase from 23 cents in the year-ago quarter.
Total revenue remained flat at $495.7 compared with the prior-year quarter but handily beat the Zacks Consensus Estimate of $472.5 million. Foreign currency exchange rates had an unfavorable impact of around $7 million on revenues. Improvement in the Electricity segment was offset by decline in the Gas and Water segments.
Cost of goods sold edged down 1% to $339 million from $344 million in the prior-year quarter. Gross profit increased 3% year over year to $157 million. Gross margin expanded 90 basis points (bps) to 31.6%, due to favorable product mix and reduced warranty expense, partially countered by increased variable compensation.
Adjusted operating expenses decreased 11% year over year to $112 million, owing to lower legal costs and reduced headcount in general and administrative departments, which was partially neutralized by higher variable compensation costs. Itron posted adjusted operating income of $44.7 million compared with $25.9 million in the year-ago quarter. Operating margin expanded 380 bps to 9% in the quarter.
Segment Performance
Electricity Segment: Net sales at the Electricity segment escalated 13% year over year to $245.6 million in fourth-quarter 2016. The segment reported adjusted operating income of $22.7 million increased 11% from $20.4 million in the year-ago quarter.
Gas Segment: The segment’s sales dropped 5% year over year to $135.8 million. Adjusted operating income was $23.3 million, a 7% year-over-year decline.
Water Segment: The Water segment reported sales of $114.4 million, down 16% from $136 million in the prior-year quarter. The segment reported adjusted operating profit of $10.5 million, up 2% from $10.3 million posted in the year-ago quarter.
Itron, Inc. Price, Consensus and EPS Surprise
Itron, Inc. Price, Consensus and EPS Surprise | Itron, Inc. Quote
Financial Position
Itron ended 2016 with cash and cash equivalents of $133.6 million compared with $131 million as of 2015 end. The company generated cash flow from operations of $116 million in 2016 compared with $73.4 million in the prior year.
On Feb. 23, 2017, Itron’s board of directors authorized a new share repurchase program. Per the authorization, the company will repurchase up to $50 million of common stock over a 12-month period.
Fiscal 2016 Performance
For 2016, Itron reported adjusted earnings per share of $2.54, an impressive 248% improvement from 73 cents in the prior year. Earnings also beat the Zacks Consensus Estimate of $2.44. Including one-time items, earnings were 82 cents compared with 33 cents in the prior year. Revenues improved 7% year over year to $2.01 billion, in line with the Zacks Consensus Estimate.
Bookings and Backlog
Itron had bookings of $653 million in fourth-quarter 2016. At 2016 end, backlog was at $1.7 billion and 12-month backlog was at $761 million compared with total backlog of $1.6 billion and $836 million as of 2015 end.
Outlook
For 2017, Itron expects adjusted earnings per share to lie between $2.80 and $3.10. The mid-point of the guidance reflects 16% year-over-year growth. Revenues are projected to range between $1.9 and $2.0 billion, the mid-point of which depicts a 3% decline from 2016.
The guidance assumes that foreign currency exchange rates will remain consistent with current levels on average in 2017. It factors in average fully diluted shares outstanding of approximately 39.5 million for the year and an effective tax rate of approximately 35%.
In the past one year, Itron outperformed the Zacks categorized Electronics Testing Equipment subindustry. The company’s shares gained around 59.7% during this period, compared with roughly 41.5% gain recorded by the industry.
Itron currently carries a Zacks Rank #3 (Hold).
Key Picks
Some better-ranked stocks in the same space include Cognex Corporation CGNX, Teradyne, Inc. TER and Applied Optoelectronics, Inc. AAOI. All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cognex Corporation has a positive average earnings surprise of 28.40% for the last four quarters. Teradyne generated a positive average earnings surprise of 24.85% in the trailing four quarters. Applied Optoelectronics has delivered an impressive average positive earnings surprise of 116.49% in the past four quarters.
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