Smart meter maker Itron (s ITRI) looks set to clean up in 2010. Being the leader of the U.S. smart meter market during a period that saw the largest investment in U.S. history (via the $4 billion in smart grid stimulus funds) will do that for a company. Smart grid analyst Jesse Berst last year explained Itron’s influence to me this way: A utility doesn’t do a large smart meter rollout without talking to Itron, period.
Analysts are predicting big things for the Liberty Lake, Wash.-based firm, which was founded back in 1977. This morning Pacific Crest analyst Ben Schuman upgraded Itron to Outperform with a price target of $86, and also increased his estimates for Itron’s 2010 annual revenue and earnings per share to $1.99 billion and $3.11, respectively, up from $1.96 billion in revenue and per-share earnings of $2.98.
Schuman says that current smart meter contracts in California and Texas will drive revenues for Itron’s fourth quarter specifically, prompting him to lift his fourth-quarter revenue and earnings-per-share estimates to $455.7 million and 67 cents, up from $435 million in revenue and 60 cents a share in earnings. Currently, the company’s smart meter utility contract wins include Southern California Edison, San Diego Gas & Electric and CenterPoint Energy (s cnp).
That boosted estimate doesn’t even account for the fact that Itron was awarded tax credits through the government’s program for clean energy manufacturing projects, which Schuman says will add another 12 cents to Itron’s earnings per share within the next several quarters. Itron was one of the only smart meter firms to get in on the recently announced tax credits (General Electric (s GE), which also makes smart meters, did as well). Itron said the credits would help it ramp up manufacturing at Itron’s smart meter plant in Oconee, S.C.
Over the past six months Itron’s stock has also steadily risen to trade, at last check, at $71.18, up from the mid-$50 range in mid-October, and the low-$50 range last summer.
As we explained in this post on Who Will Win Big In the Smart Meter Rollout? last year, a small but entrenched group of competitors makes up the smart meter market: Itron, Landis+Gyr, Sensus, Elster and GE. Itron might not have the most innovative technology but it’s pretty much the leader when it comes to market share. GE is the dark horse in the race, given its work on some of the more cutting-edge technology out there. But while innovative technology can win over some contracts, many utilities are far more interested in low costs.
Schuman explained Itron’s edge this way: “We still believe that Itron’s AMI product will struggle competitively, but our contacts have indicated that, following some fits and starts, the company has differentiated itself with its ability to execute deployments.”