Itron Challenged By Wild Swings In Stock Price Flat Earnings Projection Trigger Plunge In Value Of Company’s Stock

Mima Scarpelli has held a lot of hands this week.

The treasurer of Itron Inc. said she has talked to more than 100 investors since last Thursday, when the Spokane maker of automatic meter-reading equipment disclosed flat earnings projections for the second and third quarters of this year.

Last Friday, Itron’s stock plummeted in response to the news. A share worth $50.25 at the close of trading on Thursday fetched only $34 at the end of Friday.

Trading volume exploded to 2.2 million shares, more than 20 times the normal turnover.

And the activity wiped our virtually all the appreciation in Itron stock since the first of the year.

The stock closed Thursday at $31.25, off $2.50.

Scarpelli said the bust was not a surprise to Itron officials.

“A lot of people were concerned about activity in the stock before the announcement,” she said.

Itron shares opened 1996 at $33.50, and traded in that area for the next two weeks.

Scarpelli said the stock took off after two big announcements and favorable mention by a prominent analyst in Barron’s magazine in mid-January.

The analyst, Karlene Ziegler of Artisian Partners, said Itron had a good product line and enviable share of a market that was largely untapped.

The report brought triple the requests for information the company normally receives, Scarpelli said. “It reached audiences we hadn’t previously reached.”

As the stock began to soar in the wake of Ziegler’s comments, other analysts and investors speculated on whether the shares were fairly valued, she said.

Because there are no comparable companies that could help provide a benchmark, Scarpelli said she and other company officials spent a lot of time educating would-be investors about Itron and its market potential.

Itron has shipped about 6.5 million meter modules into a market with a potential need for 235 million meters, Scarpelli said, adding that the company’s sales represent about 80 percent of the total for all vendors.

“There’s a huge way to go,” she said.

Meanwhile, Itron reported first-quarter revenues 26 percent higher than those for the same period in 1995, although net income declined because of an acquisition made in the interim.

Itron shares fluctuated wildly. On April 30, a share traded as high as $60 - the all-time peak - before falling back to $58.75. Even that was $7 in one day.

In a bizarre incident May 24, a misinterpreted report by an analyst triggered a $8 setback for the stock, all of which was reversed when the confusion was cleared up.

Scarpelli said that episode had nothing to do with Itron’s decision to temper expectations about company performance in the second and third quarters. The projections were released as soon as management had them, she said.

Although the market’s reaction slightly exceeded what the company anticipated, she said the flight of the growth and momentum investors who had fueled the stock’s runup was no surprise.

At the first whiff of an earnings disappointment, Scarpelli said, “They’re just not interested.”

Lesa Sroufe, an analyst with Regan MacKenzie in Seattle, said many investors had bought the stock with exaggerated expectations about short-term performance.

Like others, she has lowered her estimates on the company this year, but raised her rating on the stock based on its much lower price.

“The long-term fundamental story behind this company has not changed,” Scarpelli said.

Many callers this week have expressed concerns about the company, she said, but others were taking a different point of view.

“I know it’s bad news for you guys, but I’ve wanted to own this stock.”

, DataTimes