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TheStreet Open House

Why Itron (ITRI) is Plunging on Thursday

Stocks in this article: ITRI

NEW YORK (TheStreet) -- Itron (ITRI) was tumbling on Thursday after lower-than-expected earnings and guidance sparked a series of analyst downgrades.

By market open, shares had taken off 15.1% to $33.29.

The company, which makes electrical meters for the energy sector, posted fourth-quarter net income of 36 cents a share. Revenue of $524 million came in flat on the year-ago quarter.

Analysts surveyed by Thomson Reuters had anticipated net income of 74 cents a share on $526.94 million in sales.

Over fiscal 2013, the Washington-based company recorded per-share earnings of $1.90, lower than an expected $2.29 a share due to a discrete tax item which had a 35 cent impact.

"While fourth quarter results were impacted by a goodwill impairment charge in our Electricity segment and a discrete tax charge, the steps we have taken in 2013 position Itron to be more competitive in a tough economy and global marketplace," said CEO Philip Mezey in a statement.

For full-year 2014, management expects earnings between $1.30 and $1.80 a share with sales of $1.825 million to $1.925 billion. Analysts had predicted earnings of $2.04 a share on $1.91 billion in revenue.

"Despite a more conservative outlook, I am encouraged by the progress of our ongoing efforts to improve financial performance and build a solid foundation for future growth and profitability," added Mezey.

Following earnings, JPMorgan downgraded the stock to "underweight" from "neutral", while Brean Capital cut it to "sell" from "hold" with a $28 price target. Both analyst firms cited lower-than-expected guidance as reason for the ratings revision.

Meanwhile, Canaccord Genuity downgraded shares to "hold" with a price target of $38 from $48.

"While shares likely get washed-out as management overhauls the business, we look for a catalyst (e.g. improving fundamentals, M+A, secular acceleration) to get constructive on this market leader," analysts John Quealy and Chip Moore wrote in a report.

Also see: Itron Authorizes $50 Million Share Repurchase Program

Also see: Itron Announces Fourth Quarter And Fiscal 2013 Financial Results

TheStreet Ratings team rates ITRON INC as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate ITRON INC (ITRI) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."

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