Badger Meter Inc. (BMI): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
We are downgrading our recommendation on Badger Meter from Neutral to Underperform with a target price of $46. Earnings improved 60% year over year to $0.32 per share in the first quarter of 2014, but missed the Zacks Consensus Estimate of $0.44. Badger Meter's performance could be impacted by weak growth for automation sales, macroeconomic headwinds and the negative impact of foreign exchange. Volatility in raw material prices could also hurt margins for the company. Furthermore, weak public construction spending remains the most significant risk along with higher construction costs, labor shortage and the strained global economy.

Overview:

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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