Itron (ITRI)

Resource management provider Itron (NASDAQ:ITRI) reported Q3 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 5.5% year on year to $581.6 million. On the other hand, next quarter’s revenue guidance of $560 million was less impressive, coming in 4.4% below analysts’ estimates. Its non-GAAP profit of $1.54 per share was 4.3% above analysts’ consensus estimates.

Company Overview

Founded by a small group of engineers who wanted to build a more efficient way to read utility meters, Itron (NASDAQ:ITRI) offers energy and water management products for the utility industry, municipalities, and industrial customers.

Measurement and inspection instrument companies may enjoy more steady demand because products such as water meters are non-discretionary and mandated for replacement at predictable intervals. In the last decade, digitization and data collection have driven innovation in the space, leading to incremental sales. But like the broader industrials sector, measurement and inspection instrument companies are at the whim of economic cycles. Interest rates, for example, can greatly impact civil, commercial, and residential construction projects that drive demand.

Competitors offering similar products include Badger Meter (NYSE:BMI), A.O. Smith (NYSE:AOS), and Honeywell (NASDAQ:HON).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Itron’s sales grew at a weak 1.1% compounded annual growth rate over the last five years. This wasn’t a great result, but there are still things to like about Itron.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Itron’s annualized revenue growth of 8% over the last two years is above its five-year trend, suggesting some bright spots. We also think Itron’s is one of the better Inspection Instruments businesses as many of its peers faced declining sales because of cyclical headwinds.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Product and Service, which are 85% and 15% of revenue. Over the last two years, Itron’s Product revenue (measurement and control equipment) averaged 9.4% year-on-year growth while its Service revenue ( project management, installation, consulting) averaged 5.2% growth.

This quarter, Itron’s revenue fell by 5.5% year on year to $581.6 million but beat Wall Street’s estimates by 0.6%. Company management is currently guiding for a 8.6% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 1.9% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products and commands stronger pricing power.

Itron’s unit economics are better than the typical industrials business, signaling its products are somewhat differentiated through quality or brand. As you can see below, it averaged a decent 32.3% gross margin over the last five years. That means for every $100 in revenue, roughly $32.28 was left to spend on selling, marketing, R&D, and general administrative overhead.

Itron’s gross profit margin came in at 37.7% this quarter, up 3.7 percentage points year on year. Itron’s full-year margin has also been trending up over the past 12 months, increasing by 2.1 percentage points. If this move continues, it could suggest better unit economics due to some combination of stable to improving pricing power and input costs (such as raw materials).

Itron was profitable over the last five years but held back by its large cost base. Its average operating margin of 5.4% was weak for an industrials business.

On the plus side, Itron’s operating margin rose by 9.3 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, Itron generated an operating margin profit margin of 14.1%, up 2 percentage points year on year. Since its gross margin expanded more than its operating margin, we can infer that leverage on its cost of sales was the primary driver behind the recently higher efficiency.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Itron’s EPS grew at an astounding 25.6% compounded annual growth rate over the last five years, higher than its 1.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Itron’s earnings can give us a better understanding of its performance. As we mentioned earlier, Itron’s operating margin expanded by 9.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Itron, its two-year annual EPS growth of 46% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Itron reported adjusted EPS of $1.54, down from $1.84 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 4.3%. Over the next 12 months, Wall Street expects Itron’s full-year EPS of $6.03 to stay about the same.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Itron has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.8% over the last five years, slightly better than the broader industrials sector.

Taking a step back, we can see that Itron’s margin expanded by 7.1 percentage points during that time. This is encouraging because it gives the company more optionality.

Itron’s free cash flow clocked in at $113.4 million in Q3, equivalent to a 19.5% margin. This result was good as its margin was 10 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Itron has shown solid business quality lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.6%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Itron’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

Itron is a profitable, well-capitalized company with $1.33 billion of cash and $1.27 billion of debt on its balance sheet. This $62.22 million net cash position gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by Itron’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. On the other hand, its revenue guidance for next quarter missed and its full-year revenue guidance fell slightly short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock remained flat at $137.90 immediately after reporting.

Updated: December 3, 2025 at 10:43 PM EST

When considering an investment in Itron, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Itron is a fine business. Although its revenue growth was weak over the last five years and analysts expect growth to slow over the next 12 months, its rising cash profitability gives it more optionality. And while its relatively low ROIC suggests management has struggled to find compelling investment opportunities, its expanding operating margin shows the business has become more efficient.

Itron’s P/E ratio based on the next 12 months is 14.6x. Looking at the industrials landscape right now, Itron trades at a pretty interesting price. If you trust the business and its direction, this is an ideal time to buy.

Wall Street analysts have a consensus one-year price target of $140.20 on the company (compared to the current share price of $98.17), implying they see 42.8% upside in buying Itron in the short term.