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Why Should You Dump Badger Meter (BMI) From Your Portfolio?

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Badger Meter, Inc. (BMI - Free Report) has been disappointing investors of late. Is it time for investors to offload this stock from their portfolio? Let’s delve deeper and find out.

Estimates Moving South

The stock has seen the Zacks Consensus Estimate for current-year earnings as well as for 2018 being revised downward over the past 90 days, thus reflecting a negative outlook of analysts. For 2017, the consensus mark has dropped 7.1% to $1.18 per share and for 2018, declined 8.5% to $1.30.

Price Performance

Shares of Badger Meter underperformed the industry over the past three months. The stock has gained only 2.8% compared with the industry’s growth of 8.4%.



Negative Earnings Surprise History

The company missed the Zacks Consensus Estimate in two of the trailing four quarters. Further, it recorded an average negative earnings surprise of 3.33% over the last four quarters.

Badger Meter, Inc. Price and Consensus

 

Badger Meter, Inc. Price and Consensus | Badger Meter, Inc. Quote

Unfavorable Zacks Rank and Score

Badger Meter carries a Zacks Rank #5 (Strong Sell) and has an unimpressive VGM Score of D. Here V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three scores (Value: B, Growth: A, Momentum: B). Such a score allows investors to eliminate the negative aspects of a stock and select winners.

Expensive Valuation

Badger Meter's trailing 12-month price to earnings (P/E) ratio is 41.7, above the industry's average trailing 12-month P/E ratio at 21.4. This implies that the stock is overvalued.

Disappointing Q3

Badger Meter’s third-quarter 2017 earnings declined 10% year over year, affected by elevated brass and other costs. The bottom line lagged the Zacks Consensus Estimate. Although sales in the quarter increased 3.9% year over year, the metric fell short of the Zacks Consensus Estimate. Municipal water sales, which represent around 75% of total third-quarter sales, were impacted by lower sales of residential meters and related technologies.

Persistent Headwinds

Badger Meter continues to bear the brunt of rising copper prices, which will hurt its margin performance. Further, delayed orders of the ORION Cellular LTE endpoint will likely dent its municipal water sales in the next quarter. Also, the company noted that sales from the Middle East continue to be irregular in nature. Moreover, higher debt to total capitalization, short-term increases in inventory and higher quality-control costs remains concerns for the company.

Key Picks

Some better-ranked stocks in the same sector are Applied Materials, Inc. (AMAT - Free Report) , Allied Motion Technologies Inc. and Analog Devices, Inc. (ADI - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Materials has an expected long-term earnings growth rate of 12.7%. Year to date, its shares have soared 62.8%.

Allied Motion Technologies has an expected long-term earnings growth rate of 16%. Shares of the company have surged 55.8% year to date.

Analog Devices has an expected long-term earnings growth rate of 10.4%. Its shares have rallied 19.4% during the same time frame.

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