Monday, November 06, 2006

Calls of Note Part 3

- JP Morgan notes they believe the adoption of Advanced Metering Infrastucture (AMI) will drive re-acceleration of growth for Itron (NASDAQ:ITRI) in 2007, however the size and complexity of AMI contracts may lengthen the sales cycle and push ITRI's top-line re-acceleration into late2007/early 2008.

The firm is therefore trimming their 2007 estimates to align more closely with the November 1st guidance; 10-22% PF EPS growth on 5-11% sales growth. Firm's revised forecast of $2.72 PF EPS on sales of $689mm, puts us at the mid-point with PF EPS growth of 14% on sales growth of 7%. The revision should also re-set consensus at a more conservative level that will allow for more constructive interpretation of results.

They leaving their Focus List Price Target unchanged at $69, but are revising target date to December 31st, 2007. The target date reflects firm's view of the appropriate time-horizon in which the AMI investment thesis plays out. The price target is based on an assigned P/E multiple of 22 times 08 PF EPS of $3.12. JP Morgan originally added ITRI to the focus list on July 10th at $53.15, with the expectation of a 30% return in one-year, which now turns into a 17-month time-horizon.

Notablecalls: JP Morgan has been one of the more outspoken bulls on ITRI. Now their 2007 EPS est is a tad below consensus. I'm not sure this will have an immediate impact on the stock price but I would not be surprised to see ITRI lower from current levels at some point between now and Dec 31 2007.

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