Badger Meter (BMI) Misses Q1 Earnings & Revenue Estimates

Badger Meter Inc.’s (NYSE:BMI) first-quarter 2018 earnings declined 13% year over year to 26 cents per share. In addition, earnings missed the Zacks Consensus Estimate of 39 cents.

Sales in the quarter increased 3.4% year over year to a record $105 million, but fell short of the Zacks Consensus Estimate of $109 million. The year-over-year upswing was driven by increased BEACON Advanced Metering Analytics revenues, and the recent D-Flow and Carolina Meter acquisitions. However, the company’s domestic municipal water-meter sales remained flat year over year in the quarter, partly due to delay in several expected orders affected by poor weather conditions.

Cost and Margins

Cost of sales rose 8.5% year over year to $68.3 million. Gross profit in the reported quarter came in at $36.7 million, down 4.9% from $38.7 million recorded in the year-earlier quarter. Gross margin came in at 35%, contracting 300 basis points (bps) from the year-ago quarter due to lower-volume impact on capacity-utilization costs, higher brass expenses and the Scottsdale shut-down costs.

Selling, engineering and administration expenses flared up 6.7% to $27 million from $25 million in the prior-year quarter due to acquisition expenses. Operating income dipped 26.5% to $10 million from $14 million recorded in the comparable quarter last year. Consequently, operating margin shrunk 390 bps to 9.5%.

Financial Position

Badger Meter reported cash and cash equivalents of $13.5 million at the end of first-quarter 2018, up from $11.2 million recorded at year-end 2017. The company recorded receivables of $63.4 million at the first-quarter end compared with $58.2 million as of Dec 31, 2017. Inventories were $85 million at the end of the reported quarter, which remained flat compared to the year-end 2017 tally.

Outlook

Badger Meter expects to benefit in 2018 on the back of strengthening E-Series ultrasonic water meters and the ORION Cellular endpoint radios. Further, positive sales momentum and the company’s actions regarding price increases remain catalysts for second-quarter 2018 performance.

The company faced delay in orders due to adverse weather conditions in a number of key markets in the first quarter. However, it expects that these delayed orders will be shipped in the second and third quarters, consequently benefiting revenues. In addition, price increases on many products came into effect at the beginning of this year and will be fully realized over the next several quarters.

Share Price Performance

Over the past year, Badger Meter has underperformed the industry with respect to price performance. The stock has gained around 17%, while the industry recorded 24% growth during the same time frame.

Zacks Rank & Key Picks

Badger Meter currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the same industry include Allied Motion Technologies, Inc. (NASDAQ:AMOT) , Sensata Technologies Holding N.V. (NYSE:ST) and Watts Water Technologies, Inc. (NYSE:WTS) . All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Allied Motion Technologies has a long-term earnings growth rate of 16%. Its shares have surged 90%, over the past year.

Sensata Technologies has a long-term earnings growth rate of 10%. The company’s shares have rallied 33% during the past year.

Watts Water has a long-term earnings growth rate of 12%. The stock has gained 32% in a year’s time.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>