Itron Inc.

 

Itron is in the “smart grid” field, developing solutions for the measurement, and effective management, of water, electricity, and gas.  Itron has had periods of rapid growth and stagnation partly due to dealing with large customers and the time it takes for contracts to evolve especially when customers are adapting to new technologies.  At FY19 Investor Day, mgmt expects FY21 revs to be modestly up from FY18 but optimization and cost reduction efforts to drive 17-32% improvement in Gross Profit and 50-73% improvement in Operating Income, depending on debt reduction and lower interest expense, EPS in FY21 could be $4-$5, up from $2.37 in FY18.

 

Ests:     4Q19   1Q19   FY19    FY20

Revs    599m   623.9   2.47b   2.55b

EPS      .53       .74       3.14     3.60

 

P=77.40, D/C=49%, TTM EPS 3.27 P/E=24X, FY20 P/E=22X.

 

4Q19   .72 vs .88 -18%, est .53, FY19 EPS 3.32 vs 2.65

  • Feb 24, 2019, P=78.52, TTM EPS=3.32, P/E=24X, FY20 P/E=22X

  • Revs +7.7% to 628m, GM 28.3% vs 30.1%, OM 7.4% vs 8.3%, OpInc -4.9%

  • Device Solutions -9% to 206.1m, Networked Solutions +20.8% to 368.7m, Outcomes -1% to 53.6m

  • Bookings 767m, B/B=1.2, FY B/B=1, Backlog 3.2bn, 12m backlog 1.5bn

  • Adj Ebitda 56.8mm vs 58.8m, FY19 EBITDA 270m  vs 235.8m

  • FY20 Guidance: Revs -1 to +3% to 2.475-2.575bn, EPS +1-16% to 3.35-3.85

  • 4Q Revs came in higher than mgmt. expected due to Networked Solutions pull-ins from 1Q20

  • While FY20 expected to be muted growth, expect FY21 to accelerate based on deployment schedules in backlog

3Q19   1.04 vs 1.13 -8% est .65

  • Nov 4, 2019, P=77.40, TTM EPS=3.27, P/E=24X, FY20 P/E=22X

  • Revs +4.7% to 624m, GM 31.5% vs 33.1%, OM 10.6% vs 11.8%, OpInc -6%, margins impacted by higher warranty costs and variable comp partly offset by restructuring benefits.

  • Device Solutions -3% to 213.3m, Networked Solutions +11% to 356.2m, Outcomes -1% to 54.9m

  • EBITDA 11.9% vs 13.5%, YTD 11.4% vs 9.9%

  • Bookings 609m, B/B=0.98, Backlog 3.1bn, 12-month backlog 1.4bn

  • Q/Q EPS improved meaningfully and beat estimates mostly due to lower tax rate (21% vs 34%), estimate FY19 tax rate 27% vs 31% previously estimated, would boost FY19 guidance by 0.18

  • Still expect 4Q Revs below 3Q, guidance looks like 4Q EPS will be down a bit y/y (estimates are for slightly up) but quarterly movements aside, longer-term opportunity remains, the stock isn’t cheap at 24X earnings but continued execution on their plan could accelerate growth and drive improved margins, delivering earnings in line or above what was discussed at their analyst day.  It might be an interesting investment but it might not be the most dynamic, wildfires in California and other disasters present a significant opportunity.

2Q19   .87 vs .51 +71%, est .47

  • Aug 5, 2019, P=57.96, TTM EPS 3.36 P/E=18X, FY19 P/E=17X.

  • Revs +8.4% to 635m (+11% ex fx), GM 30.1% vs 30.1%, OM 9.9% vs 7.5%, OpInc +43%, adj EBITDA +28%, OpEx 128m vs 132m, EBT +53%, tax rate 30% vs 37%

  • Bookings 702m, B/B=1.11, Backlog 3.1bn, 12m backlog 1.4bn

  • Device Solutions -8% to 217.7m due to lower EMEA, Networked Solutions +20% to 355.9m due to accelerated projects, Outcomes +15% to 61.4m

  • FY19 Guidance: Revs 2.45-2.50bn, previously 2.35-2.45bn, EPS 2.80-3.00, previously 2.35-2.75, while guidance is much better, still implies decline in 2H

  • Mgmt expects 3Q>4Q as most of the accelerated projects were planned for 4Q

  • Solid execution, demand appears solid, cost reduction efforts are taking hold, component cost and inventory levels still elevated but still seeing improvements, number of parts with lead times >6 months decreased by more than 60% from peak.

  • From recent investor day, mgmt. expects modest revenue growth from 2018 to 2021 but 17-32% improvement in Gross Profit and 50-73% improvement in adj OpInc.  Could drive EPS of $4-$5 depending on debt reduction, lower interest expense, significant improvement in FCF.

1Q19   .70 vs .13 w 32% TR, est .44 down from .64

  • May 6, 2019, P=53.47, TTM EPS 2.84, P/E=19X, FY19 P/E=21X

  • Revs +1.3% to 615m (+5% ex fx), GM 30.5% vs 29.6%, OM 9.2% vs 4.6%, OpInc +104%

  • Bookings 473m, B/B=0.77 vs 0.9, expect FY19 B/B to be 1 based on submitted bids/deal flow.

  • Device Solutions -11% to 221.8, Networked Solutions +11% to 336.4m, Outcomes +2% to 56.4m, 

  • Backlog 3bn, down slightly from a year ago. 12 month backlog 1.4bn 

  • Revs 4% above estimates, EPS significantly better than est, slightly better revenues with OpEx being better due to timing of spending/lumpiness of projects, some revenues and EBITDA pulled in from 2H

  • Seeing improvements in supply chain, number of parts with lead times >6 months is down >25%, 1Q margins still impacted by higher component costs.

  • Guidance: Expect 2Q revs and EPS to be flat to slightly down q/q due to timing benefits in 1Q, maintaining FY Guidance.  

  • While better than estimates, timing shift benefitted 1Q and it’s too early for mgmt. to see significant change from their FY outlook. Stock is rallying hard on a very weak day.

4Q18   .66 vs 1.01, -35%, ex .22 tax benefit, est .68 down from 1.32, FY18 EPS 2.37 vs 3.06

  • Feb 27, 2019, P=61.57, TTM EPS 2.65, P/E=23X, FY19 P/E 24X Guidance.

  • Revs +7% to 587m, GM 30.1% vs 31.8%, OM 8.3% vs 10.2%, OpInc -13%

  • New segmentation: Device Solutions -4.5% to 227.6m, Networked Solutions +20.3% to 305.1m, Outcomes -7.6% to 54.3m

  • Bookings 786m, B/B=1.3X, Backlog 3.2bn, 12m backlog 1.3bn

  • 4Q18 and FY18 had a $11m (0.22/sh) special warranty expense vs 17m recovery in FY17m, not expected to repeat as problem contained and rectified (related to mfng move).

  • Guidance: FY19 Revs 2.35-2.45bn (vs 2.38bn, est 2.49bn), EPS 2.35-2.75 (-1% to +16%, est 3.31)

  • Expect almost double-digit growth in Networked Solutions and Outcomes, high-single digit decline in Device Solutions due to softness in EMEA which had strong FY18

  • Expect 1H GM similar to 4Q18 then increase 150-200bps in 2H vs 1H driving EPS improvement of 0.46 in FY19, tariffs to hit EPS .15, tax to drag another .09

  • Reached >70m in cost savings, expect total of $140m by 2020 (almost $1.50 per share after 20% tax)

  • FY19 Guidance a bit underwhelming, growth opportunity remains but it’s taking longer to really materialize, continued cost improvements and wins should eventually drive the stock.

3Q18   1.13 vs .77, +47%, est .84 down from 1.00

  • Nov 5, 2018, P=54.77, TTM EPS=2.78, P/E=20X, FY19 P/E=13X, FY19 est looks high

  • Revs 596m, +4% ex acquisition, GM 33% vs 34.1%, OM 11.8% vs 10.3%, OpInc +39.6% to 70.4m

  • Adj EBITDA 81m vs 58m

  • Electricity -1.3% to 236.8m, OM 12.3% vs 10.6%, Gas +18.9% to 156.7m, OM 20.2% vs 16.0%, Water -2% to 112.6m, OM 7.4% vs 12.6%, Networks 89.8m, OpInc 7m

  • Bookings 593m, Backlog 3.1bn, 12m backlog 1.4bn

  • EPS better than est due to strong water sales that have higher margins.

  • Continue to expect supply chain headwinds resulting in reduced FY18 rev guidance, expect higher lead times and component shortages to extend into FY19

  • FY18 Guidance: Revs 2.37-2.38bn, EPS 2.40-2.50, implies 4Q Revs 580m-590m (est 644), EPS .63-.73, -37% to -28%, est 1.32

  • Company just can’t deliver consistent results, valuation is factoring in growth that isn’t happening, FY19 estimates look high.

2Q18   .51 vs .71, est .49 down from .69

  • August 6, 2018 P=60.60, TTM EPS=2.42, P/E=25X, FY19 P/E=14X

  • Revs 586m, +2% ex acquisition, GM 30% vs 33.7%, OM 7.5% vs 10.8%, OpInc -18.5% to 44.1m

  • Adj EBITDA 56.9m vs 60.2m, CFO 41m vs 30m, FCF 29m vs 17m

  • Electricity flat at 250m, OM 12.2% vs 10.9%, Gas -1% to 137m, OM 10.4% vs 16.3%, Water +9.3% to 124.6m, OM 6.3% vs 16.5%, Networks 73.6m, OpInc (2.9m)

  • Bookings 579m, Total backlog 3.1bn, 12m backlog 1.4bn,

  • Mgmt feels integration of Silver Spring is going well, cost savings ahead of schedule, supply chain constraints stabilizing, estimating 70m impact in FY18 resulting lower EPS outlook

  • Guidance: Raised FY18 Revs to 2.425-2.475bn from 2.33-2.43bn, lowered adj EPS to 2.75-2.90 from 2.95-3.35 implying EPS improvement in 2H, just not as much as previously expected.

  • Mgmt expects component cost increases, higher tax rate and interest to hit EPS guidance by 0.76 but offsets of .43 by accelerated cost savings of Silver Springs acquisition plus improved operational performance resulting in .33 reduction to guidance.

  • While lower EPS guidance is negative, higher revenues coupled with stabilizing supply chain and improved cost savings and operational performance provide solid reasons to look through the EPS guidance.

1Q18   .13 vs .57, est .13 

  • Revs 607m, +9% ex acquisition, GM 29.6% vs 33.0%, GP +14%, OM 4.6% vs 8.1%, OpInc -28%, Adj EBITDA 40m vs 46m, adj OpEx 152m vs 119m, Bookings +31% to 557m, B/B=0.9

  • Electricity +5.8% to 252.5m OM 7.9% vs 8.1%, Gas +10.9% to 137.7m, OM 11.8% vs 19.4%, Water +14.4% to 131.2m, OM 4.5% vs 9.4%, Networks 85.9m, OpInc -161k

  • Total Backlog 3.1bn, 12m Backlog 1.4bn

  • Continued constrained supply of components pressuring prices, pushing some of their expected margin benefits for 2Q into later in the year.

  • On top of expected savings driven from restructuring by 2020, expect Silver Springs acquisition to drive additional 50m, expect Debt/EBITDA ~2X in 2 years from 4.4X currently.

4Q17   1.01 vs .68, est .93, FY17 EPS 3.06 vs 2.54

  • Revs +11% to 551m (+8% ex fx), GM 31.7% vs 31.6%, Bookings +24% to 811m, B/B=1.47X

  • Total Backlog +6% to 1.8bn, 12m backlog +22% to 931m

  • Completed acquisition of Silver Spring in January, will add another 1.2bn to backlog

  • Implementing new restructuring to optimize supply chain, manufacturing, product development, sales, pre-tax cost 100-110m (FY17 CFO 191m), expect to result in 45-50m in annualized savings upon completion by end of 2020.

  • Guidance: 1Q Revs 575-600m, EPS .10-.15 (est .62), FY18 Revs 2.33-2.43, EPS 2.95-3.35 (est 3.13)

  • FY EPS guidance is from a decline of 3.6% to growth of 9.4% which doesn’t seem inspiring but it’s interesting in context of the very bad 1Q EPS guidance due to noisy purchase accounting (much stronger 2H partly due to savings from prior restructuring).

3Q17   .77 vs .77, est .89

  • Revs -3.9% to 487m (est 526.6m), GM 34% vs 33.7%, OM 10.2% vs 10.2%, OpInc -4.5% to 49.6m, Bookings 343m, B/B=0.7

  • Had some water project delays, also transitioning supply chain activities and consolidating manufacturing ops, impacted 3Q results but do not anticipate 4Q impact.

  • Total Backlog 1.5bn, 12-month backlog 847m (+16%), additional 325m of business not yet booked

  • FY Guidance: EPS at or near low end of the previous range, 2.95-3.15

  • Disappointing quarter but opportunity still remains.

2Q17   .71 vs .65, est .68

  • Revs -1.9% to 503, GM 33.8% vs 33.1% ex $8m insurance recovery, OM 10.5% vs 8.2% , OpInc +26% to 53m, Bookings +19% to 416m, B/B=0.83, Backlog 1.6bn, 12m backlog 860m (up >20% y/y)

  • FY Guidance: Revs 2.03-2.06bn (est 1.99bn), EPS 2.95-3.15 (est 3.02)

1Q17   .57 vs .44, est .48

  • Revs -4% to 478 , GM 32.9% vs 32.8%, OM 7.9% vs 6.4% (OpInc +18% to 38m), Bookings +8% to 424m, B/B=0.89 Backlog 1.6bn, 12m backlog 819m

  • CFO 63m vs 34m on better working capital management (CFO almost 3X adj NI)

  • Decent quarter with revs slightly better than expected and EPS 18% better than expected.

  • Mgmt seeing benefits of focusing on operational efficiencies and higher-valued solutions (smart solutions almost 50% of total shipments vs 38% in 1Q15 and 46% in 1Q16, I’m not sure what the difference is between 46% and almost 50% but hey, it’s going the right way). Mgmt committed to mid-teens EBITDA by end of 2018 (9.4% in 1Q17 vs 8% last year).

4Q16   .68 vs .45, FY 2.54

  • 4Q Revs 495.7m vs 496.4m, bookings 653m, Backlog 1.7bn vs 1.6bn LY, 12m backlog 761m vs 836m LY

  • FY17 Guidance: Revs 1.9-2.0bn vs 2.0bn, EPS 2.80-3.10 vs 2.54