Canaccord Getting Constructive On Itron: Upgrades To Buy

• Itron, Inc. ITRI has seen an increase of 16.79 percent in its share price over the past one month, reaching a high of $35.10 on October 15.
• John Quealy of Canaccord Genuity has upgraded the rating on the company from Hold to Buy, while raising the price target from $35 to $45.
• Quealy believes that the stock’s risk-reward profile is more attractive longer term at the current levels, following several years of underperforming the broader market.

Analyst John Quealy explained that there have been various developments over the past couple of months that support the current upgrade, such as the expectation that the savings from Itron’s restructuring program would begin to show up in 3Q15.

According to the Canaccord report, the “improvement in Smart Grid market tone and opportunity after several years of malaise, M&A valuation support from the metering group, along with recent activist interest working to push valuation creation in the nearer term” also fueled the upgrade.

In addition, the recent stake acquired by an activist investor could help “amplify” the efforts of the company’s new COO, Thomas Deitrich, who took over in October.

Quealy also mentioned that Itron’s balance sheet was “very clean,” with “ample room to support both strategic M&A and the authorized $50M buyback.”

Quealy expressed optimism regarding the broader smart grid market, given that international holdouts were likely to lead to enabling legislation for smart deployments in 2017, while on the domestic front, several utilities were expected to deploy various technologies, such as metering endpoints and analytics.