Itron Disappoints Investors With Poor Fourth Quarter And Weak Guidance

on Wednesday reported its fourth quarter results, which failed to impress investors. The company announced an EPS of $0.72, missing the consensus estimate by three cents. Revenue of $524 million fell $2.94 million short of the consensus estimate. Itron guided its full year 2014 year EPS to be $1.30 to $1.80, 47.5 percent below the consensus estimate of 2.95. Shares of Itron sold off immediately following the company's earnings report, but should investors view the sell-off as a buying opportunity?

Patrick Jobin, analyst at Credit Suisse, on Thursday lowered his estimates for 2014 and 2015 following Itron's poor quarterly report. “We lower our 2014/2015 estimates to $1.66/$2.34 (from $2.66/$3.54) to reflect the continued pressures,” said Jobin in a note to clients. “We are encouraged, however, by management's recent acknowledgement of the need to rethink the way they approach parts of their business.” The fundamental issues that resulted in the company's poor quarter remains, according to Jobin. Itron's poor results were “partly due to the loss of the ~$4m/year R&D tax credit (~$0.10) and a $0.20 impact from the deferred tax asset charge, it is also a result of the continued weakness and long-duration of projects in the electric business.” Jobin also noted that several positive catalysts will not play a role until at least 2015. As an example, In 2012, Itron was selected by

for a 2m meter deployment. According to regularity documents, this project wouldn't ramp until 2017. Shares are Neutral rated with a price target lowered to $38 from a previous $45.

Vishal Shah analyst Deutsche Bank, said that Itron issued a fourth quarter result and 2014 guidance that were softer than expected. “While the company has done a good job of cutting costs to help mitigate lack of volumes (and longer term we are encouraged by the restructuring initiatives), we expect 2014 to be another transition year with margins likely to remain weak until volumes pick up,” said Shah in a note to clients. Shah sees 2014 to be a transition year where the gas and water business will grow modestly and the electricity business declines by 11 percent. Gross margins are likely to remain flat to compared 2013. By 2015, revenues should grow 4.5 percent driven by an eight percent growth in the electricity business. 2016 will represent a “more normalized earnings environment,” with total revenue growth of five percent, as all three main segments are expected to grow five to six percent. Shares are Hold rated with a price target lowered to $34 from a previous $39.

Paul Coster, analyst at JPMorgan, said that Itron's quarterly results and guidance were significantly below expectations and there are few short-term catalysts to support shares. “Itron reported 4Q results below expectations and FY14 guidance was significantly below expectations (~47% below consensus at the mid-point),” said Coster in a note to clients. “While we believe ITRI is executing well on things that it can control (restructuring, buybacks, etc), we believe the stock will underperform our coverage until large-scale international meter deployments begin in earnest.” Despite the lack of near-term catalysts, investors should not be shorting the stock. Coster noted that there are potential positive catalysts ahead, such as contract awards, but the contracts have historically shown a tendency to be delayed. “We do not view this stock as a good short; catalysts tilt risk to the upside somewhat.” Shares were downgraded to Underweight from Neutral with a price target lowered to $30 from a previous $41.