Since early 2021, the US dollar has risen more than 40% against the yen and circa 15% against the euro. Against the Israeli shekel, which is of interest to us here, the dollar is up 22% from early 2022 to date. This strengthening has caused earnings pressure and stock price declines for some US companies with significant exposure. But I still favor Ituran (ITRN), writes George Gilder, editor of Gilder’s Technology Report.
Two multinational companies I like, Ituran and Magic Software (MGIC), are both based in Israel. Both noted currency challenges in their most recent earnings reports, but described very different outcomes.
Despite currency headwinds, Ituran delivered growth in gross profit and gross margins for the second quarter of 2023. Magic Software, on the other hand, lowered its 2023 annual revenue guidance range from $585-$593 million to $570-$580 million, due primarily to the falling value of the NIS (New Israeli Shekel) versus the US dollar.
Interesting up to a point, but currency fluctuations are transitory. They will ultimately be washed out by the secular trends and growth trajectories both companies are positioning for, reinforcing my recent theme of patience.
Ituran is currently riding a wave of exceptional performance, largely thanks to the company’s groundbreaking work in telematics technologies for its location-based services for connected vehicles.
Ituran’s services weave together a range of advanced technologies, including GPS tracking, Internet of Things (IoT) connectivity, proprietary hardware, and AI-driven software.
These converging innovations have transformed applications such as stolen vehicle recovery, leading to swift vehicle retrieval. A recent milestone includes the patenting of an anti-jamming algorithm, reinforcing the resilience of Ituran’s GPS technology. And it’s paying off.
The second quarter of 2023 saw a surge in subscription revenue to an impressive $59.2 million, marking a 13% increase from the previous year, floated by a subscriber base of approximately 2.2 million. Net income was $12.2 million—an increase of 40% compared to $8.7 million in the second quarter of last year.
Thanks to the company’s long and excellent performance in stolen vehicle recovery, Ituran has attracted growing numbers of insurance companies as clients, providing stable revenue in the face of economic uncertainty. The company also launched a new product in Latin America—one of its major markets—focused on vehicle recovery for the motorcycle sector. Last year alone, there were an estimated 5.4 million motorcycles sold in Latin America, making the two-wheelers an attractive add-on.
Ituran’s balance sheet is strong with approximately $34.5 million in cash and marketable securities against debt of just $4.5 million. And strong operational cash flow ($17.5 million in Q2) allows the company to fund investments and sustain dividend payments.
Taken together, Ituran’s connected telematics technologies position the company to harness emerging trends in intelligent mobility, while its fiscal acumen keeps it all on track.