Summary of Q3 Performance: Badger Meter, a water control and measurement company, reported Q3 CY2024 results that fell short of Wall Street’s revenue expectations, though earnings surpassed estimates. Revenue increased by 11.9% year-on-year to $208.4 million, slightly below the anticipated $212.2 million (a 1.8% miss). However, the company reported a 6.5% earnings per share (EPS) beat, with GAAP profit reaching $1.08 per share against the expected $1.01.
Q3 Key Highlights:
Revenue: $208.4 million, missing analyst estimates of $212.2 million.
EPS: $1.08, exceeding the $1.01 estimate by 6.5%.
Gross Margin: Improved to 40.2% from 39.1% in Q3 2023.
Free Cash Flow Margin: Increased to 20.1%, up from 15.3%.
Market Cap: $6.46 billion.
Chairman and CEO Kenneth C. Bockhorst expressed satisfaction with the company’s performance, highlighting strong sales growth, record operating margins of 19.5%, and robust cash flow generation. These results were driven by demand for Badger Meter's water management solutions, favorable sales mix, and operational efficiency.
Company Overview: Founded in 1905, Badger Meter is a pioneer in water control and measurement equipment. The company operates in a sector characterized by steady demand, as water meters are essential and replaced at predictable intervals. Recently, digitization and data collection trends have further boosted sales.
Sales Growth & Industry Impact: Badger Meter's sales grew at a compound annual growth rate (CAGR) of 13.8% over the past five years, showcasing the company’s consistent growth. More recently, its revenue growth rate accelerated, with annualized growth of 20.5% over the last two years, indicating increased demand. Despite missing Q3 revenue estimates, the company’s outlook remains optimistic, expecting high single-digit sales growth in the upcoming cycle.
Profitability & Operating Margins: Badger Meter demonstrated strong profitability, with a five-year average operating margin of 16.5%. In Q3, operating margins reached a record 19.5%, an increase of 2.6 percentage points year-on-year, reflecting the company's efficiency in managing operating expenses. Over the last five years, Badger Meter has expanded its operating margin by 3.4 percentage points, benefiting from revenue growth and operational leverage.
Earnings Growth: The company's EPS growth has been impressive, with a five-year CAGR of 20.6%, outpacing its revenue growth, which indicates that Badger Meter has become more profitable as it scales. Q3 earnings per share rose to $1.08 from $0.88 in the previous year, a 22.7% increase, exceeding analyst expectations by 6.5%. Analysts expect full-year EPS to grow 13.2% to $4.03 over the next 12 months.
Outlook: Despite the revenue miss in Q3, Badger Meter’s management remains positive about future growth, expecting high single-digit revenue growth. However, this is below the consensus estimate, which expects 12% revenue growth in Q4. The company’s stock fell by 4.8% to $209 after the earnings release.
In conclusion, while Badger Meter’s latest quarter did not fully meet expectations, the company's strong profitability and growth potential suggest that it remains a solid long-term investment. Further analysis on valuation and longer-term fundamentals can provide a clearer indication of whether the stock is a buy at its current price.
Q3 Key Highlights:
Revenue: $208.4 million, missing analyst estimates of $212.2 million.
EPS: $1.08, exceeding the $1.01 estimate by 6.5%.
Gross Margin: Improved to 40.2% from 39.1% in Q3 2023.
Free Cash Flow Margin: Increased to 20.1%, up from 15.3%.
Market Cap: $6.46 billion.
Chairman and CEO Kenneth C. Bockhorst expressed satisfaction with the company’s performance, highlighting strong sales growth, record operating margins of 19.5%, and robust cash flow generation. These results were driven by demand for Badger Meter's water management solutions, favorable sales mix, and operational efficiency.
Company Overview: Founded in 1905, Badger Meter is a pioneer in water control and measurement equipment. The company operates in a sector characterized by steady demand, as water meters are essential and replaced at predictable intervals. Recently, digitization and data collection trends have further boosted sales.
Sales Growth & Industry Impact: Badger Meter's sales grew at a compound annual growth rate (CAGR) of 13.8% over the past five years, showcasing the company’s consistent growth. More recently, its revenue growth rate accelerated, with annualized growth of 20.5% over the last two years, indicating increased demand. Despite missing Q3 revenue estimates, the company’s outlook remains optimistic, expecting high single-digit sales growth in the upcoming cycle.
Profitability & Operating Margins: Badger Meter demonstrated strong profitability, with a five-year average operating margin of 16.5%. In Q3, operating margins reached a record 19.5%, an increase of 2.6 percentage points year-on-year, reflecting the company's efficiency in managing operating expenses. Over the last five years, Badger Meter has expanded its operating margin by 3.4 percentage points, benefiting from revenue growth and operational leverage.
Earnings Growth: The company's EPS growth has been impressive, with a five-year CAGR of 20.6%, outpacing its revenue growth, which indicates that Badger Meter has become more profitable as it scales. Q3 earnings per share rose to $1.08 from $0.88 in the previous year, a 22.7% increase, exceeding analyst expectations by 6.5%. Analysts expect full-year EPS to grow 13.2% to $4.03 over the next 12 months.
Outlook: Despite the revenue miss in Q3, Badger Meter’s management remains positive about future growth, expecting high single-digit revenue growth. However, this is below the consensus estimate, which expects 12% revenue growth in Q4. The company’s stock fell by 4.8% to $209 after the earnings release.
In conclusion, while Badger Meter’s latest quarter did not fully meet expectations, the company's strong profitability and growth potential suggest that it remains a solid long-term investment. Further analysis on valuation and longer-term fundamentals can provide a clearer indication of whether the stock is a buy at its current price.