It has been about a month since the last earnings report for Badger Meter (BMI Quick QuoteBMI - Free Report) . Shares have added about 2.5% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Badger Meter Q2 Earnings & Revenues Lag Estimates

Badger Meter reported relatively lackluster second-quarter 2019 results with year-over-year decrease in revenues and adjusted earnings due to order postponements.

Net Income

Net earnings for the reported quarter were $11.4 million or 39 cents per share compared with $6.2 million or 21 cents per share in the year-ago quarter, primarily driven by lower cost of sales. Notably, second-quarter 2018 earnings were negatively impacted by higher pension and retirement charges.

Adjusted earnings for the reported quarter were 39 cents per share compared with 42 cents in the year-earlier quarter. Adjusted earnings missed the Zacks Consensus Estimate by 8 cents.

Revenues

Net sales were $103.5 million compared with $113.6 million in the year-ago quarter as customers largely deferred orders awaiting the company’s next generation large static meters and LTE-M radio products. The top line lagged the consensus estimate of $117 million.

Other Details

Cost of sales decreased from $72.1 million to $63.3 million due to stringent cost-cutting exercises. Gross profit was $40.3 million, down from $41.5 million in the year-earlier quarter, the respective margins being 38.9% and 36.5%. Despite lower sales revenues, gross margin improved year over year due to positive product and regional sales mix, as well as favorable price dynamics as brass input costs remained lower. Operating earnings were $15 million or 14.5% of sales, which improved 10 basis points year over year.

Notably, Badger Meter advanced the launch process of the new three- and four-inch commercial E-Series Ultrasonic meters. The company continued its thrust on innovating new products, owing to which customers deferred orders to obtain the latest version of advanced technology products.

Cash Flow and Liquidity

During the second quarter, Badger Meter generated $23.1 million of net cash from operations compared with $18.4 million a year ago, bringing the tally for first-half 2019 and first-half 2018 to $40.9 million and $25.2 million, respectively. Free cash flow was about $20.8 million, up 28% from the prior-year quarter. As of Jun 30, 2019, the company had a cash balance of $23.9 million with $4.6 million of short-term debt.

Going Forward

Management remains optimistic about the company’s long-term prospects, supported by a 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 -7.41% due to these changes.

VGM Scores

Currently, 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 F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 #5 (Strong Sell). We expect a below average return from the stock in the next few months.