Itron Stock Skids On Weaker Earnings Outlook Bearish Second-Half Forecast Blamed For 25% Drop In Value

Itron Inc. Tuesday reported record sales and income for the second quarter, but advised investors that earnings for the second half of 1995 may fall below expectations.

The stock market reacted harshly to the forecast, pushing the price of the company’s shares down as much as $9.50 to $23 in early trading, but the stock rebounded to close at $24.875, down $8.375.

Itron expects a slowdown in earnings because of increased competition, which is forcing the company to spend more on research and development, said President Johnny Humphreys.

The Spokane maker of hand-held and automatic meter-reading equipment earned $2.6 million, or 20 cents per share, for the quarter, compared with $1.8 million, or 14 cents per share, for the same period in 1994.

Revenues were $37.7 million vs. $28.6 million a year ago.

For the first six months of the year, Itron earned $4.8 million, or 38 cents per share, compared with $2.9 million, or 25 cents per share, in 1994.

Revenues increased to $12.9 million from $11.9 million during the period.

Humphreys said automatic meterreading system sales increased 73 percent during the quarter, including sales to 19 new customers. Hand-held system sales improved 13 percent.

But customers are shifting buying toward shorter-term contracts, he noted, and Itron’s shippable backlog shrank from $62 million at the end of March to $52 million at the end of June.

Humphreys also said more competitors are entering the market, and many utilities are establishing new partnerships in meter-reading. Itron will respond by increasing its own product development efforts, he said.

“Because of the need to accelerate market and product development spending for the long-term strength of the company without corresponding short-term revenue growth, the company believes its earnings for the remainder of 1995 may be below expectations,” Humphreys said.

But he added that the trend will not necessarily extend into 1996.

Humphreys told brokers in a morning conference call that he anticipated second-half earnings only slightly below the 90 cents per share most analysts had predicted, said Fred Dickson, an analyst with D.A. Davidson.

But Itron will no longer be a mere manufacturer of metering equipment, Dickson said.

In the future, the company will lease and service the devices, sacrificing up-front revenues for a long-term income stream.

“This probably will be a higher margin, higher revenue business for Itron,” he said. “That’s a positive.”

Dickson said the stock was beat up Tuesday by investors who expected Itron earnings to continue a more rapid buildup based on manufacturing sales.

“Those guys all headed for the exits at the same time,” he said.

Also, on Monday, Itron agreed to purchase its Spokane Valley headquarters building from Pentzer Development Corp.

The company paid $2.4 million at closing, and signed a note for the remaining $5.6 million.

, DataTimes ILLUSTRATION: Graphic: Stock plunge