Badger Meter (BMI) Q2 Earnings Miss, Revenues In Line

Badger Meter Inc.’s BMI second-quarter 2016 earnings per share rose 18% year over year to a record 65 cents. Earnings, however, fell short of the Zacks Consensus Estimate of 67 cents.

Higher sales of residential and commercial municipal water products, particularly sales of commercial metering products and technology solutions led to the year-over-year improvement. Shares of Badger Meter inched up 0.73% following the earnings announcement.

Badger Meter’s second-quarter sales rose 5% to a record $104 million, in line with the Zacks Consensus Estimate. Sales of both residential and commercial municipal water products increased in the quarter. This helped counter lower sales of flow instrumentation products, due to weak industrial markets. Substantial increase in sales was witnessed in the company’s latest products line – BEACON Advanced Metering Analytics (AMA) solution with ORION cellular technology and E-Series Ultrasonic meters.

Cost and Margins

Cost of sales increased 1% year over year to $64.4 million. Gross profit in the quarter was $39 million, up 12% from $35 million in the prior-year quarter. Gross margin was 38%, up 200 basis points (bps), from 36% a year ago. This was driven by increased sales volumes and lower brass prices.

Selling, engineering and administration expenses increased 7% year over year to $24 million. Operating income surged 22% to $14.9 million from $12.2 million in the year-ago quarter. Consequently, operating margin expanded 200 bps to 14%.

Financial Position

Badger Meter reported cash and cash equivalents of $7.3 million at the end of the second quarter, down from $8.1 million at year-end 2015. Receivables of around $61 million at the end of the quarter were higher than $56 million as of Dec 31, 2015. Inventories were $81 million at the end of the year compared with $79 million as of Dec 31, 2015. The debt-to-total capitalization ratio was 18% at the end of the quarter as against 24% at year-end 2015.

Moving forward, Badger Meter will benefit from new products. The company also stands to benefit from strong fundamentals over the long term. Its focus on helping water utilities and customers to conserve water will drive additional sales in the future.

BADGER METER Price, Consensus and EPS Surprise

BADGER METER Price, Consensus and EPS Surprise | BADGER METER Quote

Headquartered in Milwaukee, WI, Badger Meter provides liquid-flow measurement products and control technology. It also serves water and gas utilities, municipalities and industrial customers worldwide. The company’s products, which are developed both internally and in collaboration with other technology companies, are used for a wide variety of applications related to water, oil and chemicals.

At present, Badger Meter has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the sector are Nanometrics Incorporated NANO, Global Brass and Copper Holdings, Inc. BRSS and Worthington Industries, Inc. WOR. While Nanometrics and Global Brass sport a Zacks Rank #1 (Strong Buy), Worthington Industries holds a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>