BMI

Why Badger Meter Stock Is Off the Charts Today

Shares of water measurer Badger Meter (NYSE: BMI) jumped 12% through 11:15 a.m. ET Thursday after exceeding expectations with its Q1 2024 earnings report this morning.

Analysts had forecast Badger Meter would earn $0.82 per share on sales of $182.3 million -- but Badger beat those numbers with a stick. Badger's earnings for the quarter came within a whisker of $1 a share -- $0.99 -- and sales were $196.3 million.

Badger Meter Q1 sales and earnings

Badger Meter scored wins across the board this morning, growing sales 23% year over year, expanding its operating profit margin by 290 basis points to 18.6%, and growing its net income a whopping 50%. CEO Kenneth Bockhorst credited both "robust customer demand" and "operating execution" for the "exceptional" results.

Sales growth among water utility customers was particularly strong, up 29% -- continuing a yearlong trend of 30%-ish sales growth in this sector. This suggests that America's long-delayed project to improve water infrastructure is now well underway.

Is Badger Meter stock a buy in 2024?

There are pluses and minuses in this for Badger Meter investors. On the one hand, Bockhorst notes that Badger Meter will face "more difficult prior-year comparisons as the year progresses" in 2024. On the other hand, though, he agrees that the water industry is currently enjoying a "resilient macro trend" that should "drive sales and earnings growth."

My big worry as an investor: Continuation of this trend could already be baked into the stock's price. While 50% Q1 earnings growth was certainly impressive, Badger stock also trades at a very impressive price-to-earnings ratio of 48. That's a fair price to pay if growth keeps going at its present pace, and Badger's share price surge today is certainly justified by the news.

But if growth slows at all, Badger investors could find themselves caught in a trap. Caveat investor.

Should you invest $1,000 in Badger Meter right now?

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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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