Badger Meter Falls Short of Ests - Analyst Blog

Badger Meter Inc. ( BMI) reported fourth-quarter 2012 earnings per share (EPS) of 39 cents compared with 8 cents in the year-ago quarter. However, reported EPS fell short of the Zacks Consensus Estimate of 44 cents. The year-over-year growth was driven by robust increase in sales and improved margins.

Total revenue surged 22% on a year-over-year basis to $74 million in the quarter, but missed the Zacks Consensus Estimate of $76 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 10% to $45.5 million in the reported quarter. Gross profit improved 49% to $28.8 million in the quarter from $19.4 million in the prior-year quarter. Gross margin expanded 690 basis points year over year to 38.8%, reflecting the addition of higher-margin products from Racine Federated as well as lower copper costs.

Selling, engineering and administration expenses increased 15% to $20 million in the quarter. Operating income skyrocketed 334% to $8.8 million from $2 million in the year-earlier quarter. Consequently, operating margin expanded 860 basis points to 11.9% in the quarter.

Fiscal 2012 Performance

Badger Meter reported record earnings per share of $1.95, up 54% from $1.27 reported in 2011. Revenues increased 22% to a record $319.7 million.

Financial Position

As of 2012 end, cash and cash equivalents amounted to $6.5 million compared with $5 million as of 2011 end. Receivables increased to $45.6 million as of 2012 end from $41.2 million as of 2011 end. Inventories increased to $61 million from $49 million as of 2011 end.

During the year, Badger Meter completed the $30 million repurchase program. The company has also hiked its quarterly dividend by 6.25% to 17 cents per share in August.

Our Take

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, Wis., 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. The company retains a Zacks Rank #3 (Hold).

Badger Meter's peer, Roper Industries Inc. ( ROP ) reported fourth quarter earnings of $1.48 per share, up 20.3% from the year-ago quarter. Nanometrics Incorporated ( NANO ) reported a loss of 13 cents per share compared with 10 cents in the year-ago quarter. Watts Water Technologies, Inc. ( WTS ) is slated to release its fourth-quarter results on Feb 20.

BADGER METER (BMI): Free Stock Analysis Report

NANOMETRICS INC (NANO): Free Stock Analysis Report

ROPER INDS INC (ROP): Free Stock Analysis Report

WATTS WATER TEC (WTS): 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 Nasdaq, Inc.

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

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