Why Itron Stock Soared 26% Higher Today
Key Points
It missed on revenue, but not by much.
Meanwhile, it raised its net income guidance substantially.
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Smart meter and sensor specialist Itron (NASDAQ: ITRI) sure looked like a smart investment on Tuesday. The company's share price skyrocketed by more than 26% on a second-quarter earnings report that investors found more than pleasing.
Never mind the slumps
That morning, Itron revealed that revenue for the period fell 7% year over year to $563 million. The company's bottom line also slumped, with net income not in accordance with generally accepted accounting principles (non-GAAP, or adjusted) sliding to $71 million ($1.59 per share) from $75 million.
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That meant a mixed quarter for Itron. The consensus for revenue was $564.7 million, according to Zacks, while the consensus for adjusted net profit was $1.30 per share.
The company attributed the top-line decline to factors such as project deployment timing and lower volumes. Of its four business units, the outcomes division posted the best revenue dynamic, with its 13% year-over-year gain. The laggard was networked solutions, with its 17% slump. One new unit, resiliency solutions, contributed $16 million in revenue.
The right company at the right moment
Itron also updated its full-year guidance, and this was the source of all that investor enthusiasm.
The company narrowed its revenue forecast to $2.37 billion to $2.41 billion for the period; the previous range was $2.35 billion to $2.45 billion. Yet it pushed its adjusted earnings guidance well higher -- this is now $6.30 to $6.50 per share, up significantly from the prior $5.75 to $6.25.
In the earnings call discussing the results, CEO Tom Deitrich sounded a very bullish note on the company's future, largely due to a notable increase in demand from an important customer segment.
"The environment continues to move toward us," he said. "Utilities are being asked to manage more complexity, higher reliability expectations, greater affordability pressure, and rising demand variability all at the same time."
This plays beautifully into the hands of Itron, which has built a sturdy company on that business and others. I can easily understand why investors were so eager to buy into the stock following the earnings news.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Itron. The Motley Fool has a disclosure policy.
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