September 18, 2008 - Itron, Inc. (ITRI-NASDAQ) provides products and services for the energy and water industries. It produces electricity, gas, water, and heat meters; and various other associated metering products for residential, commercial and industrial(C&I), and transmission and distribution customers.

In addition, the company offers software knowledge applications, including modules for C&I complex billing;Web-based usage analysis for customers with advanced metering data; distribution asset analysis; load research and management; revenue protection, including theft detection and identification of unbilled revenue; and central market data collection and load settlement. Itron sells its products through distributors, representative agencies, partners, and meter manufacturer representatives, as well as through original equipment manufacturer arrangements with various meter manufacturers. The company was founded in 1977 and is headquartered in Liberty Lake, Washington.

Itron is all about efficiencies for the utility industry. With energy costs moving ever higher, the ability to monitor and report usage is essential for utilities. By eliminating much of the human element, Itron products deliver better profitability and higher reliability.

Backlog is building in the Advanced Metering Infrastructure (AMI) products. Recenlty it hit $1.4 billion thanks to 4 deals signed with major utilities, the largest being Southern California Edison. Work will start on these latest contracts in early 2009. Look for profits to increase over the year as Itron hones the process. Demand is growing for AMI. Expect more large contracts next year, including ones from non-western markets as the company continues to expand internationally.

Second quarter results give a good indication of the growth. Itron North America had a 16% increase in revenues and moved out 13% more meters than in the same quarter last year. Some customers expedited their orders from the third quarter. The Actaris division (everything outside the U.S. which accounted for 57% of revenues in 2007) had a record quarter with increases in orders for all three meter types.

Earnings over the last 5 years have grown at an annual average rate of 59.43%, an outstanding record. For the next 5 years, analysts expect growth of 19.67% a year, on average. In 2005, earnings per share were $1.84, followed by $2.16, then $2.78. This year, analysts expect $3.47 and next year, $4.37. The September quarter will report in October and analysts foresee 78 cents a share as a consensus, up from 65 cents a share last year in the same quarter. In the next quarter, look for 85 cents (compared to 81 cents last year).

The trend is Itron's friend. With U.S. electricity generating capacity slowing over the next few years, better conservation methods are needed. Higher power costs due to price increases in coal and natural gas will most likely push regulators to require better energy usage such as time of use pricing that requires more sophisticated meters. Internationally, demand is growing simply because new meters are needed to replace old ones, conserving more resources and raising revenues.

More numbers: Market Cap is $3.2 billion with 34.31 million shares outstanding. Institutions own most of the outstanding shares. Profit margin is a slim .87% with Operating margins at 6.61%. Return on assets was 2.51% in the last twelve months and Return on Equity was 1.8%. Revenues were $1.9 billion in the last year. Price to Book Value is 2.66. There is no dividend.

Itron is a growing company with good earnings. Investors already know this. That's why the stock price recently hit an all-time high of $112.92. With the rest of the market, the price has pulled back. But the valuation is still relatively high. A little lower entry point in this stock would seem advisable.

- Company Web site: www.itron.com

- Ted Allrich