Elster Group SE ADR (ELT) In Play: A Look At Other Smart Metering Stocks ITRI & ELON

On Tuesday, German gas and electric metering stock Elster Group SE ADR (NYSE: ELT) went into play and surged 12.25% to $15.49, meaning it might be a good time to take a closer look at other smart metering stocks like Itron (NASDAQ: ITRI) and Echelon Corporation (NASDAQ: ELON) that promise to use their smart technology to save energy. Elster Group SE, which is one of the top global providers of gas, electricity and water meters along with related communications and software, is majority-owned by CVC Capital Partners who bought the company in 2005 and took it public in 2010. Apparently, they now want to put the company up for sale (Note: Another privately held smart metering company called Sensus is also on the auction block). Although its unclear whether there is a potential buyer yet, Elster Group SE  would probably fetch as much as $2 billion. Its worth noting that Elster Group SE  has reported somewhat mixed revenues of $1,868.97M (2011), $1,759.34M (2010), $1,695.12M (2009) and $1,904.50M (2008) for the past four years but also improving net income of $100.88M (2011), $87.26M (2010) and $48.89M (2009) plus a net loss of $91.74M (2008). Elster Group SE  has a market cap of $1.75 billion, a 52 week trading range of $11.52 to $17.74 a share plus the stock is up 19.2% since the start of the year, down 4.7% over the past year and up 9.5% over the past five years.



Meanwhile, Itron (NASDAQ: ITRI) delivers end-to-end smart metering solutions to electric, natural gas and water utilities worldwide. Back in early June, JP Morgan reduced its estimates and price target for Itron due to macroeconomic uncertainty – giving it an overweight rating and a $48 price target. Itron also took a beating after reporting first quarter earnings that disappointed. Specifically and while revenue rose about 1% to $571.6 million, net income fell from $27.1 million to $25.4 million thanks to rising costs due to spending on product development, software implementation and on building sales teams both in Latin America and Asia-Pacific. Its worth mentioning that Itron could continue to have a bumpy ride due to the project orientated nature of the smart metering business its in as big companies usually implement a big project and then its a matter of maintenance. Nevertheless, the demand for smart meters is there as utility companies try to implement energy saving measures. On Tuesday, Itron rose 2.58% to $36.12 (ITRI has a 52 week trading range of $26.90 to $50.35 a share) for a market cap of $1.44 billion plus the stock is up 1% since the start of the year, down 24.75 over the past year and down 49.7% over the past five years. 



Finally, Echelon Corporation (NASDAQ: ELON) develops, markets and supports the an open standard, multi-application energy control networking platform. On Tuesday, Echelon Corporation fell 2.5% to $3.09 (ELON has a 52 week trading range of $3.07 to $10.05 a share – meaning its at a 52 week low) for a market cap of $131.7 million plus the stock is down 36.5% since the start of the year, up 65.5% over the past year and down 82.9% over the past five years. Investors should note that Echelon Corporation is planning to lay off employees and restructure over the next two quarters. However and for the first quarter, Echelon Corporation reported that revenues increased 42% to $40.3 million along with a GAAP net loss of $2.6 million verses net loss of $9.3 million for the same period last year. Echelon Corporation noted that its sales pipeline remains robust but the smart grid macro environment is limiting the company’s visibility into second half revenues along with their ability to achieve full year non-GAAP profitability.



The Bottom Line. The nature of the smart metering industry (along with the large number of players in it) may not mean that smart metering stocks like Elster Group SE ADR (ELT), Itron (ITRI) and Echelon Corporation (ELON) are good for investors who don’t have the stomach to handle volatility.