Itron's Earnings: Risk to Estimates in Both Directions Simultaneously

When we previewed earnings for Itron (ITRI) we said there was “risk to estimates in both directions due to Actaris acquisition.” That turned out to be even more correct than we anticipated.

Itron Announces First Quarter Results:

Itron, Inc. (NASDAQ:ITRI - News), today reported financial results for its first quarter ended March 31, 2007. Highlights include:

• Quarterly revenues of $148 million;
• Quarterly GAAP diluted EPS of 26 cents per share;
• Quarterly non-GAAP diluted EPS of 43 cents per share; and
• Quarterly EBITDA of $22 million.

Analysts were expecting the company to report $0.49 of EPS on $146 million in sales. In addition to coming up short, the indications for future revenue are also soft.

New Order Bookings and Backlog — New order bookings for the first quarter were $118 million, compared with $206 million in the first quarter of 2006. New order bookings in 2006 included bookings for three large mobile AMR deployments. Our first quarter 2007 book-to-bill ratio was .9 to 1. Total backlog was $376 million at March 31, 2007 compared to $392 million at December 31, 2006. Twelve month backlog of $225 million at March 31, 2007 remained level with twelve month backlog at the end of 2006.

For the full year 2007, we expect

• Revenues between $1.40 billion and $1.43 billion;
• Diluted non-GAAP EPS of between $2.60 and $2.90 (includes approximately $0.30 of stock-based compensation expense); and
• EBITDA in excess of $230 million

Second quarter revenues are expected to be between $370 and $390 million.

The revenue estimate for next quarter is not comparable to the $174 million analyst consensus made prior to the Actaris acquisition, nor is the full year estimate. The consensus expects $2.72 in EPS for the year. So Itron managed to demonstrate risk to the estimates in both directions simultaneously.

Disclosure: author owns call options on Itron.

ITRI 1-yr chart: