The Bottom Is Near For Itron (ITRI), Shares Spike After Earnings

After the last earnings report out of Itron (ITRI) I mentioned that I didn’t think the bottom was in and that the $45 level was looking like the next level it needed to test.  Shares did test that level and ultimately through there as well, dropping below $27.  You have to go back to 2005 to see those levels.  A few months later, I believe the bottom is close particularly after today’s high volume surge after earnings. 

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The company reported mixed results and missed again on the EPS side due to warranty losses and a goodwill impairment charge.  Old, now new again, CEO LeRoy Nosbaum, commented:

“Our third quarter revenue and cash flow were strong but our profitability was impacted by higher warranty costs and a significant goodwill impairment charge,” said LeRoy Nosbaum, Itron’s president and chief executive officer. “Despite these challenges in the quarter, our core operating results were strong. I have great confidence in this company’s prospects and I am committed to making the changes necessary to realize the potential inherent in our business. I am excited to be back at Itron and to lead this great company forward.”

The company reported an EPS of .92/share which missed the analyst estimate for $1.04/share on revenues of $616 million (vs the estimate for $583 million).  Traders didn’t bid the stock up on earnings, but rather news that the worst is over based on a few important announcements. 

The company announced a series of projects to restructure its manufacturing operations to increase efficiency and lower costs.  Translation: cutting jobs and closing facilities.  The company is attempting to get lean and believes it will pay off.  So much so that they also announced a $100 million share buyback program over the next year.  Combine this with the fact that Nosbaum is back in control and traders are feeling better about dipping their toes in down at these levels.  I can’t say I don’t agree with it, but it’s going to take some time before a definitive bottom is in place.  I believe that time is sooner rather than later. 

Looking ahead to the full year, the company is reaffirming previous revenue guidance but lowering EPS guidance.  It sees revenues unchanged at around $2.3 – $2.4 billion but EPS guidance slips from $4.20 – $4.60 to $4.00 – $4.20.  Looking ahead to 2012 the company expects both revenue and EPS to be flat to down slightly over 2011.

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