Badger Meter Inc.
) reported third-quarter 2012 earnings per share (EPS) of 62 cents,
up 35% from the year-ago quarter and way ahead of the Zacks
Consensus Estimate of 47 cents. The outperformance was driven
by a robust increase in sales, improved profit margins as well as
successful ongoing cost reduction activities.
Total revenue surged 25% on a year-over-year basis to $87
million in the quarter, outperforming the Zacks Consensus Estimate
of $81 million. The acquisition of Racine Federated as well as
increased sales of the company's municipal water products
contributed to the increase.
Costs and Margins
Cost of sales increased 13% to $52.8 million in the reported
quarter. Gross profit improved 51% to $34 million in the quarter
from $22.8 million in the prior-year quarter. Gross margin expanded
670 basis points year over year to 39.4%, reflecting the addition
of higher-margin products from Racine Federated as well as lower
Selling, engineering and administration expenses increased 37%
to $20 million in the quarter, mainly due to the acquisition of
Racine Federated. Operating income improved 77% to $14.1 million
from $7.99 million in the year-earlier quarter. Consequently,
operating margins expanded 470 basis points to 16.2% in the
As of September 30, 2012, cash and cash equivalents amounted to
$6.1 million compared with $6.5 million as of June 30, 2012.
Receivables increased to $54 million as of September 30, 2012 from
$51 million as of June 30, 2012. Inventories decreased to $60
million as of September 30, 2012 from $61 million as of June 30,
In November 2011, Badger Meter authorized the repurchase of
shares worth up to $30 million over a period of two years. The
company completed the program in the second quarter. The company
has also hiked its quarterly dividend by 6.25% to 17 cents per
share in August.
Badger Meter has posted a strong third quarter. However, the
fourth quarter is seasonally softer and some uncertainty remains in
the utility market related to the economy and municipal
The acquisition of Racine Federation, along with the previously
acquired Cox Flow Measurement and Remag, is expected to boost the
flow measurement business globally. The acquisitions broadened the
product range and customer base for Badger Meter and opened the
door for future expansion in the global arena. Furthermore, Racine
Federated's products carry slightly higher margins and thus will
contribute to margin expansion for Badger Meter.
Moreover, the new products introduced by the company including
ORION SE Advanced metering analytics system and the Electronic
E-Series received wide acceptance among its customers.
The company will continue to benefit from the customers
preference for the cost effective automatic meter reading (AMR)
technology as well as growing interest in advanced metering
analytics (AMA). However, the ongoing global economic weakness
along with the uncertain municipal financial capabilities may
affect the performance of Badger Meter moving forward.
Headquartered in Milwaukee, Wisconsin, Badger Meter provides
liquid flow measurement products and control technologies serving
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 in a wide variety of applications, including water, oil
and chemicals. Badger Meter competes with
). The company retains a short-term Zacks #2 Rank (Buy).
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