Needham & Company Smart Grid: Viewpoints From DistribuTECH 2012 - ESCO Technologies (ESE) Remains Top Pick
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Needham & Company Smart Grid: Viewpoints From DistribuTECH 2012
Analyst, Sean K.F. Hannan, said, "Last week at DistribuTECH in San Antonio, we held multiple discussions and came away with the view that Smart Grid development and activity is proceeding across the board. While adoption may continue to be choppy in the US for many of the solution providers we cover, we remain confident that business and product segments are growing in the aggregate and that opportunities have not dwindled in the big picture. Our top pick remains ESE, and we believe the multiple compression that occurred in 2011 (and somewhat continued thus far in 2012) is dramatically overdone while we still see solid opportunities in shares of ITRI, Echelon (Nasdaq: ELON), EnerNOC (Nasdaq: ENOC) & COMV."
Company Specific Notes Include:
ESCO Technologies (NYSE: ESE) – ESE (Buy rated, $34 target) has been our top smart grid pick for some time, and shares are still trading near the lower end of its normalized historical 12-20x range. With its non-utility biz in healthy shape (growing near 10%+), and prospects improving at both Doble and Aclara (SoCal Gas in waiting), we expect shares to improve through the year as bookings should enter another step-up stage..."
Comverge (Nasdaq: COMV) – (Buy rated, $3 target) We believe general biz at COMV is very positive and the company could be positioned for a very notable 2012. Specifically, we believe backlog remains up substantially (with multiple Eskom/$27M – sized deals), the sales force is now refocused after notable thermostat distractions in ’11, and another “cost efficiency” round could be on the horizon. Collectively, we believe profitability is closer than many investors think and these developments should provide a meaningful lift to shares (with opps for targets looking toward $5-6 by year end).
Itron (Nasdaq: ITRI) – The company’s Cisco (Nasdaq: CSCO) (Not/Rated) relationship remains positive, and announcements from Europe are still on the horizon for ’12. Some European utilities that have not conducted extensive pilots will not make “silver bullet” announcements for the full deployment, consistent with expectations. Other large scale decisions such as in France are in process but have been difficult to nail down since the magnitude of deployments are enormous; but, we view the decision window as shrinking and still expect announcements within the year to benefit shares.
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Analyst, Sean K.F. Hannan, said, "Last week at DistribuTECH in San Antonio, we held multiple discussions and came away with the view that Smart Grid development and activity is proceeding across the board. While adoption may continue to be choppy in the US for many of the solution providers we cover, we remain confident that business and product segments are growing in the aggregate and that opportunities have not dwindled in the big picture. Our top pick remains ESE, and we believe the multiple compression that occurred in 2011 (and somewhat continued thus far in 2012) is dramatically overdone while we still see solid opportunities in shares of ITRI, Echelon (Nasdaq: ELON), EnerNOC (Nasdaq: ENOC) & COMV."
Company Specific Notes Include:
ESCO Technologies (NYSE: ESE) – ESE (Buy rated, $34 target) has been our top smart grid pick for some time, and shares are still trading near the lower end of its normalized historical 12-20x range. With its non-utility biz in healthy shape (growing near 10%+), and prospects improving at both Doble and Aclara (SoCal Gas in waiting), we expect shares to improve through the year as bookings should enter another step-up stage..."
Comverge (Nasdaq: COMV) – (Buy rated, $3 target) We believe general biz at COMV is very positive and the company could be positioned for a very notable 2012. Specifically, we believe backlog remains up substantially (with multiple Eskom/$27M – sized deals), the sales force is now refocused after notable thermostat distractions in ’11, and another “cost efficiency” round could be on the horizon. Collectively, we believe profitability is closer than many investors think and these developments should provide a meaningful lift to shares (with opps for targets looking toward $5-6 by year end).
Itron (Nasdaq: ITRI) – The company’s Cisco (Nasdaq: CSCO) (Not/Rated) relationship remains positive, and announcements from Europe are still on the horizon for ’12. Some European utilities that have not conducted extensive pilots will not make “silver bullet” announcements for the full deployment, consistent with expectations. Other large scale decisions such as in France are in process but have been difficult to nail down since the magnitude of deployments are enormous; but, we view the decision window as shrinking and still expect announcements within the year to benefit shares.
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