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Badger Meter (BMI) Down 2.1% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Badger Meter (BMI - Free Report) . Shares have lost about 2.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Badger Meter due for a breakout? 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 catalysts.

Badger Meter Beats on Q4 Earnings, Falters on Revenues

Badger Meter reported relatively healthy fourth-quarter 2018 results with year-over-year increase in revenues and earnings on the back of solid growth dynamics. The company expects to continue this growth momentum in 2019 with leading technology offerings and a customer-focused strategy.

Net Income

On a GAAP basis, net earnings for the fourth quarter were $11.2 million or 39 cents per share compared with $7.2 million or 25 cents per share in the year-ago quarter. The increase, despite higher cost of sales, was primarily due to higher revenues and lower provision for income tax.

Adjusted net earnings increased 60% year over year to 40 cents per share, and beat the Zacks Consensus Estimate by a couple of cents.

For full-year 2018, GAAP earnings declined to $27.8 million or 95 cents per share from $34.6 million or $1.19 per share in 2017, owing to pension and postretirement costs along with higher operating costs. However, adjusted earnings for the full year were $44.9 million or $1.54 per share compared with $34.6 million or $1.19 per share in 2017.

Revenues

Quarterly net sales increased 8% year over year to $104.4 million due to high domestic municipal sales of flagship products and favorable product mix with higher-than-average sales growth of meters. However, the top line missed the Zacks Consensus Estimate of $105 million. For full-year 2018, net sales improved to $433.7 million from $402.4 million.

Other Quarter Details

Cost of sales rose from $57.6 million to $64.3 million. Gross profit came in at $40.2 million, up from $39 million in the year-earlier quarter for respective margins of 38.5% and 40.3%. Adjusted operating earnings were $15.3 million or 14.6% of sales, which improved 20 basis points year over year from 14.4%.

Liquidity

As of Dec 31, 2018, Badger Meter had a cash balance of $13.1 million and short-term debt of $18.1 million compared with respective tallies of $11.2 million and $44.6 million a year ago. Free cash flow for 2018 was approximately $52 million compared with $35 million in the prior year.

Moving Forward

Management remains optimistic about its prospects for 2019 supported by a number of reasons like a solid backlog, continued customer acceptance of its new products and the moderating of copper prices. The company continues to make progress in its various innovative technologies, including D-Flow ultrasonic technology. The company focuses on enhancing shareholders’ value through organic and inorganic investments supported by its strong balance sheet.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Badger Meter has a great Growth Score of A, a grade with the same score on the momentum front. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Badger Meter has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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