Why Itron, Inc. Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Itron, (NASDAQ: ITRI  ) dropped more than 15% Thursday after the company released disappointing fourth-quarter results.

So what: Quarterly revenue came in at $524 million, which translated to adjusted earnings of $0.36 per diluted share. Analysts, on average, were looking for earnings of $0.75 per share on sales of $526.95 million.

In addition, Itron expects full year 2014 revenue between $1.825 billion and $1.925 billion, with adjusted earnings per share between $1.30 and $1.80. By contrast, analysts were looking for earnings of $2.95 per share on sales of $2.07 billion.

Now what: Itron's adjusted results did include a $0.36-per-share charge for a discrete tax item, so the bottom-line miss there isn't all that alarming. But that still doesn't help appease concerns over Itron's guidance, which management suggested is the result of "a tough economy and global marketplace."

Even so, CEO Philip Mezey insists the company is well positioned to compete in its market, saying, "Despite a more conservative outlook, I am encouraged by the progress of our ongoing efforts to improve financial performance and build a solid foundation for future growth and profitability."

Taking the midpoint of Itron's own guidance, however, the stock doesn't look particularly cheap even after today's drop with a forward P/E around 27. As a result, I think Itron shares still have plenty of downside left before the market can seriously consider it as an appealing long-term investment.

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