Earnings Preview: Badger Meter

Zacks

Badger Meter, Inc. (BMI) is slated to report its third-quarter fiscal 2012 results on October 17, 2012. The Zacks Consensus Estimate for the quarter is 47 cents, a 2% increase from the year-ago quarter EPS of 46 cents but down 10% from 52 cents reported in the second quarter of 2012. The Zacks Consensus Estimate for revenue currently stands at $81 million, estimating an annual growth of 16%.

Second Quarter Synopsis

The company, in the second quarter of 2012, reported EPS of 52 cents, flat with the year-ago quarter but fell short of the Zacks Consensus Estimate of 54 cents.

Total revenue improved 9% on a year-over-year basis to $82 million in the quarter, missing the Zacks Consensus Estimate of $86 million. The acquisition of Racine Federated, Inc., contributed to the sales while lower sales of ORION radio transmitters for natural gas meters due to the completion of a large contract in 2011 was a partial offset.

Estimate Revision Trend

Agreement


Out of five estimates available for the stock, there has been no revision for the third quarter in the last 7 days and in the last 30 days. Similarly, there has been no revision in the fiscal 2012 estimate in the past 7 days as well as in the past 30 days. The lack of estimate revisions indicates the absence of any major catalyst driving the quarterly results.
    
Magnitude

The Zacks Consensus Estimates inched down by a penny to 47 cents in the past 30 days for the third quarter and remained unchanged for fiscal 2012 over the last 30 days. Following the second quarter results, the Zacks Consensus Estimate estimates have gone down by 3 cents to 48 cents for the third quarter and by 8 cents to $1.97 for fiscal 2012.

Earnings Surprise History

With respect to earnings surprise, Badger Meter Building has topped the Zacks Consensus Estimate in one of the last four quarters. The company delivered an average positive earnings surprise of 0.05% over the preceding four quarters, implying that it has beaten the Zacks Consensus Estimate by the same magnitude.

Our Take

The acquisition of Racine Federation, along with previously acquired Cox Flow Measurement and Remag, is expected to boost the flow measurement business globally. The acquisitions broadened the product range and customer base for Badger Meter.

It also has opened the door to future expansion in the global arena. Furthermore, Racine Federated's products carry slightly higher margins and thus will contribute to margin expansion for Badger Meter.

The company will continue to benefit from the customers preference for the cost effective automatic meter reading (AAMRQ) technology as well as growing interest in advanced metering analytics (:AMA). However, the ongoing global economic weakness along with the uncertain municipal financial capabilities may affect the performance of Badger Meter moving forward.

Headquartered in Milwaukee, Wisconsin, Badger Meter provides liquid flow measurement products and control technologies serving water and gas utilities, municipalities and industrial customers worldwide. The company’s products, which are developed both internally and in collaboration with other technology companies, are used in a wide variety of applications, including water, oil and chemicals. Badger Meter competes with Itron, Inc (ITRI). The company retains a short-term Zacks #2 Rank (Buy).

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