Itron Announces Strategic Alliance with C3 Energy, Loses on Downgrade (ITRI)

Energy and water management solutions provider Itron (NASDAQ: ITRI), along with the energy management solution provider C3 Energy, announced the launch of a new strategic alliance to integrate and jointly market an energy management solution to North American utilities. However, the stock lost ground on the news of a downgrade by Stifel Nicolaus.

The Washington-based company provides metering solutions, meter data management software and knowledge application solutions to electric, natural gas and water utilities worldwide. Traders would have thought little about the probability of retracing to the December 20, 2011, share price of $34.17 from the February 16, 2012, share price of $48.23 achieved on account of strong performance in the fourth quarter of fiscal 2011 and acquisition of cellular-based smart grid solutions provider SmartSynch at a cost of $100 million. The fiscal first-quarter 2012 results reported in the last week of April 2012 broke the support that held the share price above $44.00 for more than two months. In the first quarter of fiscal 2012, Itron beat expectations on revenues but still missed estimates on earnings per share. In less than three weeks, Itron slid back to around $34.00 per share.

The second half of May saw Itron winning an Algerian contract and opening a manufacturing facility in China. On June 13, 2012, the company also hosted a conference on the water business. These developments helped to prevent a further fall in the share price and initiated a reversal. On June 29, 2012, Itron stated that it won a contract from Australia’s largest water utility, Sydney Water, for high-efficiency meters. In the days that followed, Itron partnered with 2iE Foundation to launch a water technology training program in Africa and won a contract from Turkey’s largest gas utility. By the end of July 2012, the share price had recovered to $39.55.

Aided by higher margins, the fiscal 2012 second-quarter results declared on August 1 beat expectations. Itron also won a contract from Moldova on August 9, 2012. The following day, the share priced touched a peak of $43.80. Two weeks later, on August 21, the company won a contract from CPFL Energia of Brazil. On September 10, Itron announced its entry into the solar market with a revenue grade solar meter ideal for monitoring the energy production of residential and commercial solar photovoltaic (PV) systems. The share price of Itron once again crossed the $44.00 mark on September 10, 2012. Apart from winning few more contracts from Hungary, Australia and Turkey, the company partnered with smart grid solutions provider PrimeStone to offer energy solutions to customers in Latin America. The contracts, however, failed to push the share price beyond $46.00. On October 3, 2012, Itron received a huge contract for 1.5 million gas meters and 600,000 regulators from the Southern California Gas Company (SoCalGas). The company also launched the next-generation ultrasonic gas meter, USONIX, for residential applications on October 10, 2012. A day later, Itron introduced a simplified smart grid ecosystem approach, Nexergy, in Europe.

The strategic alliance announced today will enable utilities to leverage Itron’s smart metering and meter data management technologies to provide comprehensive energy management services to customers. Commenting on the alliance, Philip Mezey, Itron president and CEO of Energy, stated, “This alliance with C3 Energy is an excellent opportunity to enable utilities to create knowledge from smart metering, strengthening customer relationships and benefiting both the utility and its customers.”

Today, Stifel Nicolaus downgraded the stock to “sell” from a “hold” recommendation. The stock was earlier upgraded from “sell” to “hold” on October 6, 2010. Itron reacted sharply to the downgrade by opening at $39.97. An intra-day recovery took the share price up to $41.87 before closing the day at $41.79, down $0.48 or 1.1% on a volume of 409,000 shares.

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.