Shares of Itron, which was founded in 1977 and grew through the acquisitions of Schlumberger Electricity Metering in 2004 and Actaris in 2007, have dropped 28 percent over the past 12 months as U.S. stimulus funding for the smart grid declines.
The broader Dow Jones U.S.
Electronic Equipment Index has risen 24 percent over the same period.
The $787 billion economic stimulus gave a crucial boost to the smart grid in the United States and drove the adoption of Itron's advanced electricity meters, which help consumers and utilities save energy and cut costs.
With those stimulus funds drying up and the economy in sluggish recovery mode... does Itron have enough recent contract wins to prevent a 2012 blackout?
The Liberty Lake, Washington-based firm has said it doesn't expect fresh U.S. government funds for the smart grid, but it sees enough momentum to manage without federal aid.
The stock looks good as utilities will increase spending, and there are set timelines to deploy the smart grid in markets such as the UK and France.
Craig Irwin of Wedbush Securities said Itron's revenue and earnings may peak this year and dip year-on-year in 2012, but business wouldn't contract significantly next year.
First-quarter earnings topped estimates on strong sales of smart utility meters in North America and Europe.
"They have very large contracts and very good visibility for 2012. So, if you look beyond 2012, there's good credibility for Itron continuing a very full level of business," Irwin said.
Canaccord Genuity analyst John Quealy noted a recent $280 million contract in Canada should help Itron meet market expectations for next year.
"There are still several large potential smart metering jobs around the world Â— in Canada, the United States, Europe Â— that we expect news on into the fourth quarter," Quealy said.
Itron competes in its home market with General Electric Co., Badger Meter, Cooper Industries, Emerson Electric, ESCO Technologies and Roper Industries Inc.
Internationally, it is up against Elster Group, Telvent Git SA, El Sewedy Electric and Swiss rival Landis+Gyr, which has been cited as a potential $2 billion takeover target.
Others, including Wunderlich Securities analyst Theodore O'Neill, reckon the negative year-on-year comparisons could come earlier, maybe in the third quarter, so it could be time to sell out.
"These meters are highly co-related with new construction, which is weak. Stimulus money flowing to the utilities to buy the meters is also ending. I don't see anything but negative growth," O'Neill said.
Goldman Sachs analyst Mark Wienkes said the company's North American bookings are at a multi-year low, and there could be a likely drop in book-and-ship orders as European utilities finalize advanced metering plans.
Higher raw materials prices plus a potential squeeze on volume sales could pressure margins.