Itron Up 22% in Three Months: How Should Investors Play the Stock?

Core Viewpoint - Itron (ITRI) has demonstrated strong stock performance, gaining 22% over the past three months and 56.4% year to date, outperforming its sub-industry and major indices [1][4]. Market Demand and Financial Performance - Strong market demand in the energy and water sectors is driving the adoption of Itron's solutions, with revenues expanding 10% year over year in the last reported quarter [2][5]. - Itron has consistently outperformed earnings estimates, with an average surprise of 49.7% over the last four quarters [2]. - Bookings reached $487 million, with a backlog of $4 billion, indicating robust future revenue prospects [6][7]. Growth Drivers - Growth in Itron's Grid Edge Intelligence platform is fueled by data center demand, reindustrialization, electrification, and automation of water infrastructure [8]. - The acquisition of Elpis Squared has enhanced the solutions offered within the Grid Edge Intelligence platform [8]. Revenue and Earnings Guidance - Itron has raised its revenue guidance for 2024 to between $2.428 billion and $2.438 billion, up from previous estimates [9]. - Non-GAAP EPS estimates have also increased to a range of $5.28-$5.38, compared to earlier estimates of $4.45-$4.65 [10]. Operational Efficiency - The gross margin improved to 34.1%, reflecting a 70 basis point year-over-year increase due to enhanced operational efficiencies [11]. - Non-GAAP operating income rose to $79 million from $59 million in the previous year, driven by higher gross profit and revenues [11]. Technical Indicators and Valuation - Itron's forward 12-month price-to-earnings ratio stands at 24.11X, slightly below the industry average of 24.65X, indicating a potentially attractive investment opportunity [12]. - The stock is trading above its 50 and 100-day moving averages, suggesting positive market momentum [13]. Cost and Debt Concerns - Total operating expenses increased by 10.5% to $585 million in 2023, with non-GAAP operating expenses rising 1.9% year over year in Q3 2024 [14]. - Itron's long-term debt was $1.24 billion, with a debt-to-capital ratio of 47.6%, indicating a leveraged balance sheet and potential cash flow challenges [15]. Estimate Revisions - Analysts have increased earnings estimates for the current quarter by 4%, while the next quarter's estimate has been revised down by 6% [16]. - Earnings estimates for the current and next year have been revised upward by 14.9% and 1.7%, respectively [16].