More news on the economy, this time from Bank of America Chief Executive Kenneth at a speech today at The Detroit Economic Club. He told the Club that it is "pretty clear" the U.S. economy is in a recession, adding there will be “no recovery until the housing market stabilizes around the middle of 2009.”
"We won't see a real turnaround until the core problem, housing, reaches a bottom, stabilizes and turns the corner. Lewis calls for a $500 billion economic stimulus plan from Washington, primarily to help homeowners behind on their mortgages. "I can't promise the pain won't get any worse before it starts to get better," he added.
One tech stock that might tide you over, if you can stomach a company whose stock price has tanked in the past few months (and they’re hardly alone), is Itron, one of the companies at the vanguard of the utility meter industry.
With President-elect Obama heading to the White House, the federal government is expected to ramp up its green energy initiatives and Itron is well positioned to take advantage. Trading at about $42 right now, Itron has been called the “Microsoft of the utilities meter movement.”
Itron is a driving force in turning dumb utility meters into smart ones. No more will we see some guy out on the side of a house, pencil and pad in hand as he reads your meter. No, thanks to companies like Itron, meters will “read” themselves, relaying information electronically to an utility company’s IT network. Already, most developed countries are writing in new laws demanding that utilities switch to smart meter networks, primarily because the more accurate measurements will help both the private and public sector figure out where we are on energy usage in an age whose primarily color is, well, green.
Again, Itron is at the right place at the right time. According to the company’s financial reporting, its total backlog (representing committed but undelivered contracts and purchase orders) increased 51% year over year, to $1.0 billion, as of September 2008.
Business Week is out with a report of its own on Itron; some of it cautionary but most of it fairly bullish. “We think investors are concerned about Itron's total debt of $1.2 billion (as of September 2008), given the ongoing credit crisis. While we view Itron's debt-to-capital ratio as high, at 52% at the end of the third quarter, we believe the company is financially well positioned to weather the economic slowdown, based on our projection that it will generate $65 million in free cash flow in 2008 and end the year with $157 million in cash. In addition, Itron's debt does not start to mature until 2011 at the earliest. We also think the company's valuation is compelling. Our 12-month target price is $62, representing significant potential capital appreciation from recent levels. Our opinion on the shares of Itron is 5 STARS (strong buy).”
Still, Itron has yet to hit 5-star momentum. Itron came out with third-quarter numbers that surpassed what analysts thought they’d see, but that hasn’t helped the company’s stock price. It’s been languishing in the mid-$40 range, and has fallen precipitously over the past year.
What could help is the fact that much of Itron’s business, about 57%, is committed to clients outside North America. In fact, Actaris, the company’s foreign division, fueled third-quarter growth, helped along by decent foreign exchange rates. Of course, if the dollar picks up steam, that overseas momentum could evaporate.
But right now, the news is mostly good. In September, Itron won a $480 million contract to supply Southern California Edison with meters and communication equipment for the utility's $1.63 billion smart-metering program it expects to start implementing for its 4.8 million customers in 2009. In July, Itron made a similar agreement with San Diego Gas & Electric to replace or upgrade the utility's 2.3 million electric and gas meters with Itron's equipment.
If Itron can keep that kind of mojo going, the stock should pick up nicely. Smart meters, indeed.