Resource management provider Itron (NASDAQ: ITRI) met Wall Street’s revenue expectations in Q2 CY2025, but sales were flat year on year at $606.8 million. On the other hand, next quarter’s revenue guidance of $577.5 million was less impressive, coming in 7.5% below analysts’ estimates. Its non-GAAP profit of $1.62 per share was 21.6% above analysts’ consensus estimates.

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"Itron delivered solid second quarter results driving quarterly record levels of margin, profitability, and cash flow," said Tom Deitrich, Itron’s president and CEO.

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.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Itron struggled to consistently increase demand as its $2.44 billion of sales for the trailing 12 months was close to its revenue five years ago. 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 12.7% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Itron’s recent performance shows it’s one of the better Inspection Instruments businesses as many of its peers faced declining sales because of cyclical headwinds.

We can better understand the company’s revenue dynamics by analyzing its most important segments, Product and Service, which are 85.2% and 14.8% of revenue. Over the last two years, Itron’s Product revenue (measurement and control equipment) averaged 15.2% year-on-year growth while its Service revenue ( project management, installation, consulting) averaged 4.9% growth.

This quarter, Itron’s $606.8 million of revenue was flat year on year and in line with Wall Street’s estimates. Company management is currently guiding for a 6.2% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 3.6% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and indicates its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Itron was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.4% was weak for an industrials business.

On the plus side, Itron’s operating margin rose by 10.3 percentage points over the last five years.

This quarter, Itron generated an operating margin profit margin of 12.6%, 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.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Itron’s EPS grew at an astounding 21.8% compounded annual growth rate over the last five years, higher than its flat revenue. This tells us management responded to softer demand by adapting its cost structure.

We can take a deeper look into Itron’s earnings to better understand the drivers of its performance. As we mentioned earlier, Itron’s operating margin expanded by 10.3 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 74.4% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q2, Itron reported adjusted EPS at $1.62, up from $1.21 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Itron’s full-year EPS of $6.33 to shrink by 13.8%.

Key Takeaways from Itron’s Q2 Results

We were impressed by Itron’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. On the other hand, its full-year revenue guidance missed and its revenue guidance for next quarter fell short of Wall Street’s estimates. Zooming out, we think this was a mixed quarter. The stock remained flat at $137.66 immediately following the results.

So do we think Itron is an attractive buy at the current price? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.