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Category: Stock Market and Badger Meter
Date: 7 October 2019 Stock Price: $53.33 We take a look at the 2nd quarter earnings report of their 2019 fiscal year of Badger Meter a provider of flow measurement, control and communications solutions whose clients include water utilities and municipalities.
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About Badger Meter
Badger Meter is an innovator in flow measurement, control and communications solutions, serving water utilities, municipalities, and commercial and industrial customers worldwide. The company’s products measure water, oil, chemicals, and other fluids, and are known for accuracy, long-lasting durability and for providing valuable and timely measurement data.
Overview of Badger Meter's latest earnings report
- Net sales: $103.542 million (down from $113.648 million for the same quarter of the previous year)
- Net sales: decreased by -8.9% over the last 12 months
- Cost of sales: $63.266 million (down from $72.144 million for the same quarter of the previous year)
- Cost of sales decreased -12.3%by over the last 12 months
- Net income: $11.358 million (up from $6.154 million for the same quarter of the previous year)
- Diluted earnings per share: $0.39 (up from $0.21 for the same quarter of the previous year)
- PE ratio: 34
- Dividend declared: $0.17
- Dividend yield: 1.27%
- Diluted weighted-average shares outstanding: 29.211 million (up from 29.133 million for the same quarter of the previous year)
- Cash and cash equivalents: $23.894 million
- Cash and cash equivalents per share: $0.82
- Cash and cash equivalents makes up 1.53% of Badger Meter's market capital
- Cash and cash equivalents makes up 5.9% of Badger Meter's total assets
- Accounts receivable: $60.294 million
- Accounts receivable makes up 14.89% of Badger Meter's total assets
- Inventories: $83.319 million
- Inventories makes up % of Badger Meter's total assets
- Stockholders equity in Badger Meter: $316.452 million
- Stockholders equity per share: $10.83
- So Badger Meter is trading at 4.92 times its stockholders equity which is outside the expected range of between 2 and 4 which most firms ten to trade at.
- Cash generated from operations: $23.088 million
- Cash generated from operations per share: $0.79
Badger Meter's management commentary on the results and business outlook
18 July 2019, MILWAUKEE--(BUSINESS WIRE)-- Badger Meter, Inc. (NYSE: BMI) today reported results for the second quarter ended June 30, 2019.
“As a technology leader, we have encountered innovation-driven order postponements during new product launch windows. We believe we experienced that impact during the second quarter as customers, eager to adopt our new leading-edge solutions, are actively pilot testing products prior to system-wide deployment or are awaiting new product releases. While this phenomenon creates sales unevenness in the short-term, we believe being at the forefront of new technologies benefits us and our prudent customers given the long term horizon over which their decisions are based,” said Kenneth C. Bockhorst, President and Chief Executive Officer of Badger Meter.
Municipal water sales declined 9.6% from the comparable prior year quarter as customers deferred orders to obtain the latest version of advanced technology products. This is most evident with ORION® Cellular LTE-M endpoints where customer pilots and testing continue without issue. In addition, the company further advanced its quality-focused launch process for the new three- and four-inch commercial E-Series® Ultrasonic meters expected to begin shipping later this year. Finally, prior year municipal water sales included a large Middle East order, which did not repeat. Sales of flow instrumentation products were 6.6% lower year-over-year with declines across most industrial end markets.
Operating margins increased 10 basis points to 14.5% in the second quarter of 2019 from 14.4% in the comparable prior year quarter. Gross profit margins were strong at 38.9%, a 240 basis point increase over the prior year’s 36.5% despite the lower sales volume. Gross profit benefited from positive product and regional sales mix, as well as favorable price/cost dynamics.
Selling, engineering and administration (“SEA”) expenses in the second quarter of 2019 of $25.2 million were flat with the prior year, however given the lower sales volume, SEA as a percent of sales was elevated. The tax rate of 23.8% was in line with the prior year’s adjusted 23.6%. Cash from operations of $23.1 million increased 25.3% or $4.7 million year-over-year, primarily associated with improved working capital management.
Bockhorst continued, “I am encouraged by the market interest and pilot testing of our leading technologies, which continues at a robust pace. Our gross profit margins improved year-over-year for the fourth consecutive quarter. Our working capital management helped generate robust cash from operations and our continuous improvement focus on metrics including SQDC (safety, quality, delivery and cost) is evident across the organization. I want to express my appreciation to the dedicated team of Badger Meter professionals for their focus on customer quality and continuous improvement.”
Outlook
“Our backlog and new opportunity funnel remain solid, underscored by a high level of interest in our innovative smart water solutions. This includes both the larger size E-Series Ultrasonic meters and ORION Cellular LTE-M radios, which significantly improve performance and functionality. Further, I remain positive on municipal spending trends and our competitive share and positioning. Our customers are making 15 to 20 year investment decisions for their water management solutions and as such, product quality, features and breadth remain of utmost importance.” Bockhorst concluded, “Our smart water solution offerings and strong balance sheet give us confidence in our long term growth outlook as we help to preserve the world’s most precious resource.”
“As a technology leader, we have encountered innovation-driven order postponements during new product launch windows. We believe we experienced that impact during the second quarter as customers, eager to adopt our new leading-edge solutions, are actively pilot testing products prior to system-wide deployment or are awaiting new product releases. While this phenomenon creates sales unevenness in the short-term, we believe being at the forefront of new technologies benefits us and our prudent customers given the long term horizon over which their decisions are based,” said Kenneth C. Bockhorst, President and Chief Executive Officer of Badger Meter.
Municipal water sales declined 9.6% from the comparable prior year quarter as customers deferred orders to obtain the latest version of advanced technology products. This is most evident with ORION® Cellular LTE-M endpoints where customer pilots and testing continue without issue. In addition, the company further advanced its quality-focused launch process for the new three- and four-inch commercial E-Series® Ultrasonic meters expected to begin shipping later this year. Finally, prior year municipal water sales included a large Middle East order, which did not repeat. Sales of flow instrumentation products were 6.6% lower year-over-year with declines across most industrial end markets.
Operating margins increased 10 basis points to 14.5% in the second quarter of 2019 from 14.4% in the comparable prior year quarter. Gross profit margins were strong at 38.9%, a 240 basis point increase over the prior year’s 36.5% despite the lower sales volume. Gross profit benefited from positive product and regional sales mix, as well as favorable price/cost dynamics.
Selling, engineering and administration (“SEA”) expenses in the second quarter of 2019 of $25.2 million were flat with the prior year, however given the lower sales volume, SEA as a percent of sales was elevated. The tax rate of 23.8% was in line with the prior year’s adjusted 23.6%. Cash from operations of $23.1 million increased 25.3% or $4.7 million year-over-year, primarily associated with improved working capital management.
Bockhorst continued, “I am encouraged by the market interest and pilot testing of our leading technologies, which continues at a robust pace. Our gross profit margins improved year-over-year for the fourth consecutive quarter. Our working capital management helped generate robust cash from operations and our continuous improvement focus on metrics including SQDC (safety, quality, delivery and cost) is evident across the organization. I want to express my appreciation to the dedicated team of Badger Meter professionals for their focus on customer quality and continuous improvement.”
Outlook
“Our backlog and new opportunity funnel remain solid, underscored by a high level of interest in our innovative smart water solutions. This includes both the larger size E-Series Ultrasonic meters and ORION Cellular LTE-M radios, which significantly improve performance and functionality. Further, I remain positive on municipal spending trends and our competitive share and positioning. Our customers are making 15 to 20 year investment decisions for their water management solutions and as such, product quality, features and breadth remain of utmost importance.” Bockhorst concluded, “Our smart water solution offerings and strong balance sheet give us confidence in our long term growth outlook as we help to preserve the world’s most precious resource.”
Badger Meter (NYSE: BMI) stock price history
The image below, obtained from Google, shows the stock price history of Badger Meter over the last 5 years. And it's been a very good time for Badger Meter stockholders.5 years ago the stock was trading at around $24.40 a stock and its currently trading at $53.33 a stock. That's a very strong return of 118.6% provided to Badger Meter stockholders over the last 5 years. The stock of Badger Meter is trading at a lot close to the midpoint between its 52 week high and its 52 week low which to us is an indication that the sentiment towards the stock is neutral and it might be trading sideways for prolonged periods of time as it awaits a catalyst to drive the price higher or lower.
Recent coverage of Badger Meter
The following extract covering Badger Meter was obtained from Thestreet.com (article was published 29 August 2019)
In recent trading, shares of Badger Meter Inc (BMI - Get Report) have crossed above the average analyst 12-month target price of $51.00, changing hands for $51.39/share. When a stock reaches the target an analyst has set, the analyst logically has two ways to react: downgrade on valuation, or, re-adjust their target price to a higher level. Analyst reaction may also depend on the fundamental business developments that may be responsible for driving the stock price higher — if things are looking up for the company, perhaps it is time for that target price to be raised.
Read the full article here
In recent trading, shares of Badger Meter Inc (BMI - Get Report) have crossed above the average analyst 12-month target price of $51.00, changing hands for $51.39/share. When a stock reaches the target an analyst has set, the analyst logically has two ways to react: downgrade on valuation, or, re-adjust their target price to a higher level. Analyst reaction may also depend on the fundamental business developments that may be responsible for driving the stock price higher — if things are looking up for the company, perhaps it is time for that target price to be raised.
Read the full article here
Badger Meter (NYSE: BMI) latest stock valuation
So what is Badger Meter stock worth based on the release of their latest earnings report? Based on the group's latest earnings provided our valuation model provides a target (full value) price at $51.20 a Badger Meter stock. We therefore believe that the stock is slight overvalued.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $51.20. Thus we see a good entry point into Badger Meter stock at $46.10 or below. We expect the stock to pull back slight to levels closer to our target price in coming weeks and months, unless their earnings report coming out 17 October surprises to the upside,
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $51.20. Thus we see a good entry point into Badger Meter stock at $46.10 or below. We expect the stock to pull back slight to levels closer to our target price in coming weeks and months, unless their earnings report coming out 17 October surprises to the upside,