On Mar 14, we maintained our Outperform recommendation on
liquid flow measurement products and control technologies
Badger Meter Inc.
) - on the back of acquisition benefits of Racine Federation,
recovery in municipal water sales, increasing demand for its
products and competitor Elster's exit from the U.S water meter
Badger Meter's fourth-quarter earnings per share almost
increased five fold to 39 cents on the back of a 22% increase in
sales and improved margins.
Badger Meter's acquired Racine Federated, Inc., a manufacturer
and marketer of flow meters for the water industry and industrial
metering and specialty products, in Jan 2012. The acquisition
expands Badger Meter' portfolio to 12 of the 16 available global
flow technologies and will solidify Badger Meter's presence in
the industrial flow measurement market.
Municipal water sales had declined in 2011 due to concerns
over municipal spending that delayed order decisions as well as
slower housing starts. Sales picked up in 2012 on the back of
higher sales of residential meters sold with technology as well
as higher commercial meter sales. Continued recovery in
residential construction and increase in housing starts during
2012 will likely boost Badger Meter's municipal water sales.
Furthermore, the company's focus on new product development and
its ORION brand will drive sales in the municipal water
There are approximately 53,000 water utilities in the United
States, of which less than 30% have converted to an automatic
meter reading (AMR) or advanced metering infrastructure (AMI)
technology. Even with growing interest in AMI and AMA, AMR will
continue to be the first choice for a number of years as it is
the most cost-effective solution available currently. Badger
Meter has introduced AMA, believed to be the next generation of
metering technology, which will help to maintain its position as
the market leader and meet customers' future needs.
Badger Meter's competitor for utility water meters, Elster,
has decided to shut its U.S water meter business by mid 2013,
presenting a sizeable opportunity for Badger Meter. Badger Mater
is devising strategies to attract Elster's former customers and
would increase its market share from the current 28%.
Furthermore, removal of this one player could have a positive
impact on pricing dynamics in the space.
Other Stocks to Consider
Badger Meter currently retains a short-term Zacks Rank #2
(Buy) Other stocks in the same industry with a favorable Zacks
National Instruments Corporation
), which carries a Zacks Rank #1 (Strong Buy), and
Roper Industries Inc.
), which have a Zacks Rank #2 (Buy).
AMETEK INC (AME): Free Stock Analysis Report
BADGER METER (BMI): Free Stock Analysis
NATL INSTRS CP (NATI): Free Stock Analysis
ROPER INDS INC (ROP): Free Stock Analysis
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