Badger Meter reported record third-quarter 2014 earnings per share
of $0.71, up 12.7% year over year driven by higher sales of
municipal water and flow instrumentation products. Badger Meter
will continue to benefit from the introduction of new products,
acquisitions, lower cost pressure and sales mix improvement. In
addition, continued strength in the municipal channel will also
drive growth. However, the company is concerned that the fourth
quarter will probably be a weak one due to higher debt, delivery
delays, short-term increase in inventory and higher quality control
costs. Further, a tepid macro economy along with the negative
impact of foreign exchange rates may affect the company's
performance. Thus, we are reaffirming our Neutral recommendation on
Badger Meter with a target price of $58.
Headquartered in Milwaukee, WI, Badger Meter Inc. 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. The company's product lines fall into three
categories. They are as follows:
Municipal water: This is the largest category by sales volume.
It involves sales of meters, and related technologies and services
used by water utilities as the basis for generating water and
wastewater revenues. The key market is North America, primarily the
United States, as the meters are designed and manufactured to
conform to standards promulgated by the American Water Works
Association. Sales of water meters and related technologies and
services are commonly categorized as residential or commercial
water meter, the latter referring to larger sizes of meters.
Industrial flow: It includes products sold for other water-based
purposes, including irrigation, water reclamation and industrial
process applications. It also comprises meters and related
technologies and services for measuring a wide variety of fluids in
industries such as food and beverage, pharmaceutical production,
petroleum, heating, ventilating and air conditioning (HVAC),
measurement and dispensation of automotive fluids.
Specialty products: This category includes sales of radio
technology to natural gas utilities for installation on their gas
meters, valves and concrete vibrators.
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