Annotated article summary from this weekend's Barron's; receive all our Barron's summaries by signing up here:
Why Sensitive Markets May Toughen Up by Kopin Tan
Summary: Itron's (NASDAQ:ITRI) $1.6 billion buyout of privately-held Actaris might seem like bad timing: ITRI's technology to make gas, electric and water meters, along with automatic meter reading software and services serve a utility industry facing a possible market top. But utilities continue to spend, streamline operations and improve service. Actaris has installed more than 300 million meters worldwide, but just 5% of these are automatically read; in North America 35% are. ITRI's technology and Actaris' worldwide share in overseas deregulated markets position the merger well for growth. JPMorgan analyst Paul Coster finds synergy in the geographic and customer mix while the merger reunites Schlumberger's (NYSE:SLB) former metering unit and its management team. ITRI's P/E is at 19.5, within historical range, and the right level for an ITRI takeover by utilities seeking to optimize. Canaccord Adams analyst John Quealy says ITRI's shares should reach $70 from this week's $61.5. Barron's Bottom Line: The ITRI/Actaris merger presents an alternative for utility market bears, especially after last week's selloff.