Itron's Strong Earnings Results Doesn't Sway Bank of America

on Tuesday reported Q2 EPS of $0.54, a big beat of the estimated $0.36; this was down seven percent from the same quarter last year. Revenue came in at $489.4 million, compared to the estimated $465.61 million. Sales were up one percent year over year. Bank of America's gave its interpretation of earnings: “Itron reported 2Q2014 results well above BofAML/Street expectations. Rev/non- GAAP EPS of $489M/$0.54 was substantially above our $459M/$0.39 forecast and Street estimates of $467M/$0.36. Management increased its CY2014 revenue guidance range from $1.825-$1.925B to $1.9-$1.975B, and tightened EPS guidance from $1.30-$1.80 to $1.50-$1.80.” Bank of America lowered its price target from $39 to $37, and reiterated its Underperform rating on the stock: “Relative to our coverage universe, we continue to rate ITRI shares at Underperform. Our PO based on an average of our DCF (10 years, 10% WACC, terminal EBITDA multiple of 5x) and a 10x multiple on 2015E EBITDA of $180M yields our price objective of $37. A lower gross margin outlook for 2H2014 and higher assumed tax rate primarily contribute to our PO moving from $39 to $37.” Bank of America's investment thesis also remained unchanged: “Although upgrades to smart meters may be inevitable, demand continues to be be soft and international project announcements slow coming. Shipment growth beginning in 2015 is increasingly at risk, and as a result earnings growth may be as well. Itron lacks as strong a link to the growth areas in our broader coverage universe, making it a relative Underperform. However, gas and water business prospects presents greatest upside risk to our view.” Shares of Itron traded recently at $39.76, up 9.2 percent.