It has been about a month since the last earnings report for Badger Meter (BMI - Free Report) . Shares have lost about 5.6% 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 drivers.
Badger Meter Q1 Earnings Beat Estimates, Revenues Miss
Badger Meter reported healthy first-quarter 2019 financial results with year-over-year increase in earnings on the back of strong growth dynamics.
Net earnings for the quarter were $10.8 million or 37 cents per share compared with $7.5 million or 26 cents per share in the year-ago quarter, primarily driven by lower cost of sales. The figure beat the Zacks Consensus Estimate by a penny.
Net sales were $104.9 million compared with $105 million in the year-ago quarter, reflecting higher domestic revenues, volumes of new technology meters and favorable product mix with higher-than-average growth of ultrasonic meters, radios and service revenues.
However, sales were impacted by inclement weather and deferred orders by customers awaiting the company’s next generation large static meters and LTE-M radio products. The top line lagged the Zacks Consensus Estimate of $111 million.
Cost of sales decreased from $68.3 million to $64.4 million. Gross profit came in at $40.5 million, up from $36.7 million in the year-earlier quarter for respective margins of 38.6% and 35%. Operating earnings were $14.3 million or 13.7% of sales, which improved 420 basis points year over year.
Notably, Badger Meter has announced technology wins with Columbia, SC and Aurora, CO, which highlight the increasing market acceptance for cellular as the standard Advanced Metering Infrastructure solution for water utilities.
Cash Flow and Liquidity
During the first quarter, Badger Meter generated $17.8 million of net cash from operations compared with $6.8 million in the year-ago period. Free cash flow was about $15.7 million compared with $3.7 million in the prior-year period. As of Mar 31, 2019, the company had a cash balance of $15 million with $11 million of short-term debt.
Management remains optimistic about the company’s prospects through 2019, supported by a number of reasons such as solid backlog, customer acceptance of its new products and lower brass input costs. The company is poised to gain from strong order rates for innovative water solutions, including newly launched larger size E-Series Ultrasonic meters and ORION Cellular LTE-M radios. It aims to enhance shareholder value through organic and inorganic investments on the back of its solid balance sheet.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -6.67% due to these changes.
At this time, Badger Meter has a strong Growth Score of A, though it is lagging a lot 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Badger Meter has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.