Badger Meter (BMI) Up 13.1% Since Last Earnings Report: Can This Continue?

It’s been a month since the last Badger Meter (BMI) earnings report. Shares have risen about 13.1% in that time, outperforming the S&P 500.

Will the recent positive trend continue leading up to the next earnings release, or is the Badger Meter headed for a decline? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the key drivers.

Badger Meter Q2 Earnings and Revenue Top Estimates, YoY Growth

Badger gauge reported earnings of 57 cents per share for the second quarter of 2022, beating the Zacks Consensus Estimate of 53 cents. The bottom line also compares favorably with the prior-year quarter’s profit of 48 cents.

Net income for the reported quarter was $16.7 million, compared to $14 million in the same quarter last year. The year-over-year improvement can be primarily attributed to higher revenues.

Revenue

Quarterly net sales increased to $137.8 million from $122.9 million in the year-ago quarter. The 12.2% increase was primarily due to record order volume, driven by strong customer demand, effective supply chain management and continued price execution, partially offset by cost inflationary pressures and supply chain challenges.

Additionally, the top line is above the consensus estimate of $135.5 million.

Following the announcement, the company’s shares rose by 5.5% on July 20, 2022, and closed the session at $87.26.

Segment efficiency

In the quarter under discussion, sales of utility water increased by 14% thanks to the high dynamics of orders. Ultrasonic meter gains, ORION Cellular endpoint sales and higher BEACON software-as-a-service (SaaS) revenues also contributed as key growth enablers. Supply chain disruptions partially offset this.

Flow instrumentation sales increased 4% year-over-year, driven by continued strong ordering trends across most end-use applications globally. However, this was partially offset by supply chain issues that affected production volumes.

Other details

For the quarter ended in June, gross profit was $54.8 million, up 9.3% from $50.1 million in the year-ago quarter. Gross margin was 39.7%, compared to 40.8% reported in the year-ago quarter. The decline in margin resulted primarily from the increase in material, logistics and other costs. Operating profits were $22.1 million, or 16% of sales, compared to corresponding results of $18.7 million and 15.2% in the prior-year quarter.

Sales, engineering and administrative (SEA) expenses were $32.7 million, or 23.7% of sales, compared to $31.4 million, or 25.6%, in the prior-year quarter. Effective expense control and higher sales mainly contributed to year-on-year improvement in SEA’s expense leverage.

Cash flow and liquidity

In the second quarter of 2022, Badger Meter generated $19.7 million in net cash from operations, compared to $14.5 million a year ago. As of June 30, 2022, the company had $100.2 million in cash and cash equivalents and $97.3 million in total current liabilities compared to the corresponding figures as of December 31, 2022 of $87.2 million and $82.1 million USD.

How have estimates changed since then?

Over the last month, investors have witnessed an upward trend in estimate revisions.

As a result of these changes, the consensus estimate moved by 8.11%.

VGM results

At this point, the Badger Meter has a Weak Growth Score of D, although it lags slightly behind the Momentum Score with an F. Following the exact same trajectory, the stock is rated an F on the Value side, meaning it’s in the fifth quintile for this investment strategy.

Overall, the company’s overall VGM score is F. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for the stock are trending upwards, and the scale of these revisions looks promising. It’s no surprise that Badger Meter carries a Zacks Rank #1 (Strong Buy). We expect an above-average rate of return on shares in the coming months.

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