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Thursday, February 16, 2012


Your other day, Itron produced some impressive numbers and announced a really interesting acquisition of SmartSync, and the stock reaction was awesome.

The potential value creation from the eventual Smart Grid buildout can be huge, and that is why back in August I placed ITRI along side my 'timeless portfolio' (although it is not in the portfolio).  From August to now, there has been obviously a lot of volatility, along with serious management changes with ITRI.  Yesterday showed the effectiveness of those changes.

Current management took a ton of restructuring charges, and highlighted during the CC that Smart Grid project thought to be happening, are going to be happening. It just takes some time.

Normalizing out the restructuring charge, ITRI had a pretty weak 2011, growing operating income by some 5-6%. Justifying the weak performance.

Going forward, they projected a 2012 eps between 3.80-4.20.  With the current stock price near 48, that places a forward multiple of around 11-12.6. Not bad, but considering the 2011 operating income growth, and 2012 projected revenue between $2.1-2.3B (which is lower than 2011 revenue of $2.4B), the 20% appreciation in the stock seems like a bit much here.

Regardless of the numbers, I am still a fan of the smart grid build out potential, and Itron's position to benefit. I also really like the SmartSync acquisition, as it fills a void in Itron's offering, better positioning the company from a software and services perspective.

Based on Itron's guidance, they don't seem to be expecting much from an industry growth perspective for 2012. But from a company perspective, they are better positioned to take advantage of the buildout, when it eventually comes.

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