A month has gone by since the last earnings report for Badger Meter (BMI Quick QuoteBMI - Free Report) . Shares have added about 18.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Badger Meter due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Badger Meter Q3 Earnings & Revenues Top Estimates

Badger Meter reported earnings of 61 cents per share for third-quarter 2022, beating the Zacks Consensus Estimate of 60 cents. Also, the bottom line compared favorably with the year-ago quarter’s earnings of 54 cents.

Net earnings in the reported quarter were $17.9 million compared with $15.9 million in the year-ago quarter. The year-over-year improvement can be primarily attributed to higher revenues.

Quarterly net sales increased to $148 million from $128.7 million in the year-ago quarter. The 15% (up 17% excluding the unfavorable impact of the stronger US dollar) rise was primarily driven by robust customer demand. Also, the top line beat the consensus mark of $141.1 million.

Segmental Performance

In the quarter under review, utility water sales rose 17%, owing to strong demand momentum. Strength in E-Series, ultrasonic meters, ORION Cellular endpoint sales, and higher BEACON Software-as-a-Service revenues acted as major tailwinds.

Flow instrumentation sales increased 5% year over year, driven by continued strong order trends across the majority of end-market applications globally. However, it was partly offset by supply chain woes, which impacted manufacturing output.

Other Details

During the September-end quarter, gross profit was $57.5 million, up 12.4% year over year. The gross margin was 38.9%, down from the 39.8% recorded in the prior-year quarter. This downside in the margin was primarily due to rising electronic and other components, logistics and other costs. Operating earnings were $23.9 million or 16.1% of sales compared with $19.4 million and 15.1% in the year-earlier quarter.

Selling, engineering, and administration (SEA) expenses were $33.7 million or 22.7% of sales compared with $31.7 million or 24.7% in the prior-year quarter. The increase in expenses was mainly due to higher personnel costs, research & development, and travel expenses.  However, effective spending controls and higher sales mainly drove the year-over-year improvement in SEA expense leverage.

Cash Flow & Liquidity

During the third quarter of 2022, Badger Meter generated $23.8 million of net cash from operating activities compared with $15.4 million a year ago. As of Sep 30, 2022, the company had $114.8 million of cash and cash equivalents, and $101.9 million of total current liabilities compared with the respective figures of $87.2 million and $82.1 million as of Dec 31, 2021.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -5.47% due to these changes.

VGM Scores

Currently, Badger Meter has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Badger Meter has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.