Yahoo Finance Badger Meter (NYSE:BMI) Beats Expectations in Strong Q2
Water control and measure company Badger Meter (NYSE:BMI) announced better-than-expected results in Q2 CY2024, with revenue up 23.2% year on year to $216.7 million. It made a GAAP profit of $1.12 per share, improving from its profit of $0.76 per share in the same quarter last year.
Is now the time to buy Badger Meter? Find out in our full research report.
Badger Meter (BMI) Q2 CY2024 Highlights:
Revenue: $216.7 million vs analyst estimates of $203.4 million (6.5% beat)
Revenue guidance of "high single digit sales growth in the back half of the year" is below Consensus expectations of low-double-digit percentage growth
EPS: $1.12 vs analyst estimates of $0.97 (15.1% beat)
Gross Margin (GAAP): 39.4%, in line with the same quarter last year
Free Cash Flow of $34.08 million, up 81.4% from the previous quarter
Market Capitalization: $5.70 billion
“Our second quarter sales surpassed the $200 million milestone for the first time on the continued strength of AMI demand coupled with customer-accelerated backlog conversion. Record operating profit margins and robust EPS growth in the quarter were the result of higher sales volumes, operational execution and continued selling, engineering and administration (SEA) expense leverage,” said Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer.
The developer of the world’s first frost-proof water meter in 1905, Badger Meter (NYSE:BMI) provides water control and measure equipment to various industries.
Inspection Instruments
Measurement and inspection instrument companies may enjoy more steady demand because products such as water meters are non-discretionary and mandated for replacement at predictable intervals. In the last decade, digitization and data collection have driven innovation in the space, leading to incremental sales. But like the broader industrials sector, measurement and inspection instrument companies are at the whim of economic cycles. Interest rates, for example, can greatly impact civil, commercial, and residential construction projects that drive demand.
Sales Growth
Reviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Luckily, Badger Meter's sales grew at an excellent 13% compounded annual growth rate over the last five years. This is a great starting point for our analysis because it shows Badger Meter's offerings resonate with customers.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Badger Meter's annualized revenue growth of 20.9% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.
This quarter, Badger Meter reported remarkable year-on-year revenue growth of 23.2%, and its $216.7 million of revenue topped Wall Street estimates by 6.5%. Looking ahead, Wall Street expects sales to grow 9.8% over the next 12 months, a deceleration from this quarter.
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Operating Margin
Read More Operating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Badger Meter has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 16.3%. This isn't surprising as its high gross margin gives it a favorable starting point.
Analyzing the trend in its profitability, Badger Meter's annual operating margin rose by 3.3 percentage points over the last five years, showing its efficiency has improved.
In Q2, Badger Meter generated an operating profit margin of 19.2%, up 2.4 percentage points year on year. This increase was encouraging, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with its general expenses like sales, marketing, and administrative overhead.
EPS
Read MoreWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Badger Meter's EPS grew at an astounding 25.2% compounded annual growth rate over the last five years, higher than its 13% annualized revenue growth. This tells us the company became more profitable as it expanded.
Diving into the nuances of Badger Meter's earnings can give us a better understanding of its performance. As we mentioned earlier, Badger Meter's operating margin expanded by 3.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Badger Meter, its two-year annual EPS growth of 32.3% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q2, Badger Meter reported EPS at $1.12, up from $0.76 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Badger Meter to grow its earnings. Analysts are projecting its EPS of $3.83 in the last year to climb by 9.6% to $4.20.
Key Takeaways from Badger Meter's Q2 Results
We liked that Badger Meter beat analysts' revenue and EPS expectations this quarter. On the other hand, management spoke of "high single digit sales growth in the back half of the year", below current expectations of double-digit percentage growth during that period. Zooming out, we think this was a good quarter but the outlook could weigh on shares. The stock remained flat at $193.99 immediately after reporting.
So should you invest in Badger Meter right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
