Badger Meter's Q4 2019: A Splash of Optimism Amid Flow Challenges

February 5, 2020

MILWAUKEE ? In a world where water flows but earnings can sometimes trickle, Badger Meter, Inc. (NYSE: BMI) has made a splash with its fourth-quarter results for 2019. The company reported a net sales figure of $107.6 million, a respectable 3% increase from the $104.4 million in the same quarter last year. This performance comes amidst a backdrop of a generally tepid industrial climate, making their municipal water sales? 8% year-over-year increase all the more noteworthy.

EPS and Earnings Surprise: The Numbers Speak

For those keeping score at home, Badger Meter's GAAP net earnings came in at $12.3 million, translating to a diluted earnings per share (EPS) of $0.42. This marks an improvement over last year's $0.39 EPS, confirming an earnings surprise that seems to have delighted investors. When we peel back the layers, excluding the impact of executive retirement charges from 2018, that EPS represents a 5% growth from the adjusted $0.40 in Q4 2018. It?s a bit like finding an extra slice of pie at a family gathering?unexpected but certainly welcome.

Full Year Performance: A Year of Mixed Currents

Looking at the full year, Badger Meter reported total sales of $424.6 million, down from $433.7 million in 2018. Domestic municipal water sales still managed to inch up 1% year-over-year, a small victory in a landscape where many companies are battling headwinds. The gross profit margin for the year showed a healthy rise of 110 basis points, landing at 38.5%. This is a testament to their financial acumen and operational efficiency, even if the revenue forecast has seen some fluctuations.

Operating Performance and Market Outlook

CEO Kenneth C. Bockhorst expressed satisfaction with the increase in municipal water revenue, attributing it to the successful demand for their new technologies, such as the D-Flow and ORION? Cellular LTE-M radio installations. However, it wasn?t all sunshine and rainbows, as the decline in sales of flow instrumentation products?down 11% due to soft industrial activity?highlights the challenges still facing the sector. It seems that while Badger Meter is diving into the municipal market, the industrial waters are a bit murkier.

Looking Ahead: A Wave of Innovation

As we plunge into 2020, Bockhorst is optimistic about upcoming launches, including next-generation residential ultrasonic meters. He notes that municipal water spending remains healthy, and the feedback from pilot testing of their technologies is encouraging. The company?s ability to innovate and adapt to market conditions will be crucial in navigating any potential headwinds, such as rising brass costs. The commitment to a comprehensive portfolio of smart water solutions is a strategic move that could serve them well in maintaining their competitive edge.

Conclusion: Staying Afloat in Challenging Times

In summary, Badger Meter's Q4 results demonstrate a company that is not only managing to stay afloat but also harnessing opportunities for growth in a sector experiencing both turbulence and triumphs. As they embark on their 115th year in business, their focus on innovation and customer solutions positions them uniquely within the market. While the waters may be rough, Badger Meter seems poised to navigate the currents ahead with confidence.