Badger Meter's (BMI) Q4 Earnings Beat, Sales Miss Estimates

Badger Meter Inc. (NYSE:BMI) posted record earnings of 25 cents per share in fourth-quarter 2017, up 19% year over year. In addition, earnings beat the Zacks Consensus Estimate of 23 cents.

Sales in the quarter increased 3.8% year over year to a record $96.7 million, but fell short of the Zacks Consensus Estimate of $97 million. The year-over-year growth was driven by the positive impact from sales of new products, higher municipal water sales volume and continued improvement in key flow instrumentation markets, such as oil and gas.

Notable, Badger Meter’s sales exceeded the $400-million threshold for the first time in 2017, primarily driven by growth of new technologies and continued improvement in industrial markets.

Cost and Margins

Cost of sales decreased 3% year over year to $57.6 million. Gross profit in the reported quarter came in at $39 million, up 16% from $33.5 million recorded in the year-earlier quarter. Gross margin came in at 40.4%, expanding 440 basis points (bps) from the year-ago quarter despite elevated brass costs.

Selling, engineering and administration expenses went up marginally to $25.9 million from $24.4 million in the prior-year quarter due to acquisition expenses, commissions and employee incentives, as well as higher professional services fees. Operating income grew 9.6% to $13.2 million from $9.1 million recorded in the comparable quarter last year. Consequently, operating margin advanced 380 bps to 13.6%.

Financial Position

Badger Meter reported cash and cash equivalents of $11.2 million at the end of fourth-quarter 2017, up from $7.3 million recorded at year-end 2016. The company recorded receivables of $58.2 million at the fourth-quarter end compared with $59.8 million as of Dec 31, 2016. Inventories were $85.2 million at the end of the reported quarter compared with $77.7 million as of Dec 31, 2016.

2017 Performance

Badger Meter reported record earnings per share of $1.19 in 2017, up 7.2% from $1.11 per share recorded in the prior year. Earnings also outpaced the Zacks Consensus Estimate of $1.18. Revenues grew 2.2% year over year to $402.4 million from $393.8 million recorded in 2016. However, it missed the Zacks Consensus Estimate of $403 million.

Outlook

Badger Meter is poised to gain from growing demand for E-Series meters and ORION cellular endpoints, as well as BEACON Advanced Metering Analytics (AMA) managed solution in the near future. It expects that its leadership position in North American water metering, improving position in global flow instrumentation technologies and a more favorable domestic tax environment will drive the company’s performance over the long run.

Share Price Performance

Over the past year, Badger Meter has outperformed the industry with respect to price performance. The stock has gained around 29.4%, while the industry recorded 25.1% growth during the same time frame.

Zacks Rank & Other Stocks to Consider

Badger Meter currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the same sector are Canon Inc. (NYSE:CAJ) , Teradyne, Inc. (NYSE:TER) and Transcat, Inc. (NASDAQ:TRNS) . While Canon Inc and Teradyne sport a Zacks Rank #1 (Strong Buy), Transcat carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Canon Inc has a long-term earnings growth rate of 8%. Its shares have rallied 7.2%, over the past six months.

Teradyne has a long-term earnings growth rate of 12 %. The company’s shares have been up 26.8% during the same time frame.

Transcat has a long-term earnings growth rate of 8%. The stock has gained 19% in six months’ time.

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