Badger Meter Lags on Q1 Earnings - Analyst Blog


Badger Meter Inc. ( BMI ) reported earnings per share of 32 cents for the first quarter of 2014, which marked a year-over-year rise of 60%. However, the reported figure lagged the Zacks Consensus Estimate of 44 cents.

Net sales increased 16% year over year to a record $83.5 million in the reported quarter, which was in line with the Zacks Consensus Estimate. Increased revenues from residential and commercial municipal water products as well as flow instrumentation products aided the sales growth.

Costs and Margins

Cost of sales increased 16.6% year over year to $54 million. Gross profit in the quarter was $28.9 million, up from $25 million in the prior-year quarter. Gross margin decreased by 20 basis points (bps) to 34.7% due to product mix.

Selling, engineering and administration expenses increased 4.6% year over year to $21.3 million due to costs related to due diligence and other transaction-related costs for acquisition. Operating income increased 62.7% to $7.7 million from $4.7 million in the year-earlier quarter. Consequently, operating margin rose 260 bps to 9.2%.

Financial Position

As of Mar 31, 2014, Badger Meter reported cash and cash equivalents of $6.4 million versus $7.2 million as of Dec 31, 2013. Receivables increased to $54.6 million as of Mar 31, 2014 from $50 million as of Dec 31, 2013. Inventories also went up to $63.9 million as of Mar 31, 2014 from $60.9 million as of Dec 31, 2013.

Our Take

Badger Meter will continue to benefit from investment in research and development as well as the introduction of new products. Innovation in product offering has been a key growth driver for Badger Meter.

The company launched its new BEACON Advanced Metering Analytics (AMA) system in January, which made it the first major water meter company to provide water utilities with cost-effective cellular radio endpoints.

Recently, the company expanded its E-Series ultrasonic meters with a polymer version. It is a cost-effective alternative to the stainless steel version. During the first quarter, Badger Meter began the shipment of residential E-Series water meters and its ORION technology, as part of a contract with a water utility in the Middle East. The company also experienced increased sales of E-series meters in the North American market. Badger Meter claims that these E-Series meters continue to be widely accepted by customers outside North America as well.

Furthermore, the Elster business and the ongoing economic recovery will help to drive growth. Moreover, Badger Meter will benefit from improved volumes in both its municipal and industrial product lines.

Nevertheless, higher construction costs, labor shortage and the strained global economic scenario may affect the company's performance going forward.

Headquartered in Milwaukee, WI, Badger Meter provides liquid flow measurement products and control technology. It also serves 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 related to water, oil and chemicals.

At present, Badger Meter has a Zacks Rank #2 (Buy). Investors interested in the same industry could consider stocks like Newport Corp. ( NEWP ), Mettler-Toledo International Inc. ( MTD ) and Waters Corporation ( WAT ), all of which have the same Zacks Rank as Badger Meter.

BADGER METER (BMI): Free Stock Analysis Report

METTLER-TOLEDO (MTD): Free Stock Analysis Report

NEWPORT CORP (NEWP): Free Stock Analysis Report

WATERS CORP (WAT): Free Stock Analysis Report

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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, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BMI , MTD , NEWP , WAT

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