Core Insights - Badger Meter, Inc. (BMI) is expected to report second-quarter 2025 earnings on July 22, with revenue estimates at $234.33 million, reflecting an 8.2% year-over-year growth, and earnings per share estimated at $1.21, indicating an 8.04% increase from the previous year [1][2] Financial Performance - The company has consistently exceeded the Zacks Consensus Estimate in the last four quarters, with an average surprise of 10.88% [2] - Utility water sales are projected to rise to $210 million from $173 million year-over-year, driven by strong demand for mechanical and E-Series Ultrasonic meters, ORION Cellular endpoints, and BEACON SaaS solutions [4][10] Growth Drivers - Badger Meter is benefiting from steady customer demand for smart water solutions and disciplined operational execution, particularly in cellular AMI solutions [2] - The introduction of the BlueEdge framework in May 2024 aims to enhance the company's water solutions portfolio, allowing for customization across the entire water cycle [3] - The acquisition of SmartCover on January 30, 2025, adds advanced sewer and lift-station monitoring capabilities to Badger's offerings, with positive customer feedback reinforcing its strategic value [3] Margin and Cost Management - Gross margin is expected to be supported by higher volumes, a favorable sales mix, and effective price/cost management, with long-term expectations of 38-40% [5] - However, elevated expenses from growth investments may offset some of the gross margin benefits [10] Market Outlook - Despite facing a challenging year-over-year comparison in the second quarter, the company remains optimistic about long-term growth, anticipating continued high single-digit revenue growth driven by industry trends in water infrastructure and smart technologies [7] - The flow instrumentation segment is experiencing a decline, with sales expected to dip 5% year-over-year, reflecting challenges in certain de-emphasized markets [6]

Group 1: Stock Performance - Badger Meter (BMI) closed at $240.91, with a +1.36% increase from the previous day, outperforming the S&P 500's gain of 0.32% [1] - Prior to the recent trading session, shares had declined by 2.01%, lagging behind the Computer and Technology sector's gain of 7.22% and the S&P 500's gain of 4.51% [1] Group 2: Earnings Performance - Badger Meter is set to release earnings on July 22, 2025, with projected EPS of $1.21, indicating an 8.04% increase year-over-year [2] - The Zacks Consensus Estimate for revenue is $234.33 million, reflecting an 8.16% increase from the same period last year [2] Group 3: Full-Year Estimates - Full-year Zacks Consensus Estimates predict earnings of $4.93 per share and revenue of $924.92 million, representing year-over-year changes of +16.55% and +11.9%, respectively [3] Group 4: Analyst Estimates and Stock Performance - Recent changes in analyst estimates for Badger Meter indicate positive sentiment regarding the company's business and profitability [3] - Empirical research shows that revisions in estimates correlate with stock price performance, which is utilized in the Zacks Rank model [4] Group 5: Zacks Rank and Valuation - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), has a strong track record, with 1 stocks averaging a +25% annual return since 1988 [5] - Badger Meter currently holds a Zacks Rank of 3 (Hold) [5] - The company has a Forward P/E ratio of 48.2, indicating a premium compared to the industry average Forward P/E of 26.31 [6] Group 6: Industry Metrics - Badger Meter has a PEG ratio of 3.39, aligning with the industry average [7] - The Instruments - Control industry, part of the Computer and Technology sector, has a Zacks Industry Rank of 229, placing it in the bottom 8% of over 250 industries [7][8]

Core Insights - Rhythm Pharmaceuticals announced positive topline results from its Phase 2 trial of bivamelagon, showing significant BMI reductions in patients with acquired hypothalamic obesity [2][3] - The company plans to engage with regulatory authorities for a Phase 3 trial design and has requested an End-of-Phase 2 meeting with the U.S. FDA [7] Group 1: Trial Results - Bivamelagon achieved BMI reductions of -9.3% in the 600mg cohort and -7.7% in the 400mg cohort at 14 weeks [1][4] - A post-hoc analysis indicated that the BMI reductions from bivamelagon were consistent with those achieved by setmelanotide in similar patient populations [3][5] - Patients reported a mean reduction of -2.8 points in hunger scores in both the 600mg and 400mg cohorts [1][3] Group 2: Safety and Tolerability - The trial demonstrated safety and tolerability consistent with MC4R agonism, with limited instances of localized hyperpigmentation observed [4][6] - The most common adverse events included mild diarrhea and nausea, with one serious adverse event reported [6] Group 3: Next Steps and Regulatory Plans - Rhythm plans to seek input from U.S. and EU regulatory authorities regarding the Phase 3 trial design for bivamelagon [7] - The company is refining the formulation of bivamelagon to potentially improve tolerability before initiating the Phase 3 trial [7] Group 4: Company Background - Rhythm Pharmaceuticals is focused on transforming the lives of patients with rare neuroendocrine diseases and has in-licensed bivamelagon from LG Chem, Ltd [2][13] - The company’s lead asset, setmelanotide, is already approved for treating certain types of obesity [13][14]

Company Performance - Badger Meter (BMI) ended the recent trading session at $239.51, demonstrating a -1.28% change from the preceding day's closing price, trailing the S&P 500 which registered a daily loss of 0.79% [1] - Over the past month, shares of Badger Meter had lost 1.73%, lagging behind the Computer and Technology sector's gain of 7.88% and the S&P 500's gain of 5.22% [2] Earnings Projections - The company is scheduled to release its earnings on July 22, 2025, with projected earnings per share (EPS) of $1.19, reflecting a 6.25% increase from the same quarter last year, and expected revenue of $234.33 million, showing an 8.16% escalation compared to the year-ago quarter [3] - For the full year, Zacks Consensus Estimates project earnings of $4.91 per share and revenue of $924.92 million, representing changes of +16.08% and +11.9%, respectively, from the prior year [4] Analyst Estimates and Valuation - Recent changes to analyst estimates for Badger Meter reflect the latest short-term business trends, with upbeat changes indicating a favorable outlook on business health and profitability [5] - Badger Meter is currently trading at a Forward P/E ratio of 49.41, which is a premium compared to the industry average Forward P/E of 27.52 [8] Industry Context - The Instruments - Control industry, which includes Badger Meter, is part of the Computer and Technology sector and currently carries a Zacks Industry Rank of 201, placing it within the bottom 19% of over 250 industries [10]

Core Viewpoint - Badger Meter, Inc. (BMI) has shown a strong stock performance with a year-to-date gain of 14.9%, outperforming the S&P 500 and the Instruments-Control industry [1][2] Group 1: Positive Long-Term Outlook - Increasing demand for digital smart water solutions is driven by regulatory pressures, aging infrastructure, and climate-related challenges [3] - Macroeconomic factors such as replacement-driven demand and the rise of Advanced Metering Infrastructure (AMI) adoption are additional growth drivers [3] - BMI is experiencing strong demand for its products, including mechanical and E-Series Ultrasonic meters, ORION Cellular endpoints, and BEACON Software-as-a-Service revenues [4] Group 2: Strategic Acquisitions - BMI's acquisition of SmartCover Systems for $185 million enhances its monitoring solutions and expands its BlueEdge suite [7] - SmartCover contributes $35 million in annual revenues and provides technology that helps utilities monitor sewer levels, reducing costs and protecting public health [8] - The acquisition has already generated $6 million in revenue contribution within months [9] Group 3: Financial Performance - BMI reported a record quarterly free cash flow of $30 million, a 60% increase year over year, supported by improved earnings and effective working capital management [10] - As of March 31, 2025, the company had $131.4 million in cash and cash equivalents, indicating a strong cash position [10] Group 4: Challenges Ahead - Rising expenses and intense competition pose challenges, with ongoing tariff uncertainties expected to impact U.S. manufacturing operations [11] - Tariffs on electronics and components may lead to higher input costs, necessitating selective price increases [12] - The first quarter of 2025 saw SEA expenses rise to $46 million, primarily due to the incorporation of SmartCover [13] Group 5: Market Position and Valuation - BMI's stock is trading at a forward price/earnings ratio of 48.48X, significantly higher than the industry's 18.96X, reflecting its long-term growth potential [16] - Analysts have revised earnings estimates downward by 0.9% for the current quarter, indicating some caution in the market [17] Group 6: Investment Strategy - The company's strong position in the smart water solutions market and strategic acquisitions provide a competitive edge [18] - While the valuation is high and short-term cost pressures exist, robust free cash flow and a solid balance sheet offer financial flexibility [18] - New investors are advised to wait for a better entry point, while existing investors should retain their holdings [19]

Core Insights - Badger Meter, Inc. (BMI) reported Q1 2025 EPS of $1.30, exceeding Zacks Consensus Estimate by 20.4% and up from $0.99 in the same quarter last year [1] - Quarterly net sales reached $222.2 million, a 13% increase from $196.3 million year-over-year, driven by higher utility water sales and contributions from the SmartCover acquisition [1][4] Financial Performance - Gross profit for the quarter was $95.4 million, up from $77.2 million year-over-year, with a gross margin of 42.9%, an increase of 360 basis points [6] - Operating earnings surged 35% year-over-year to $49.5 million, with an operating margin of 22.2%, also expanding by 360 basis points [6] - The company generated $33 million in net cash from operating activities, compared to $21.5 million a year ago [9] Segment Performance - Utility water sales increased by 16%, supported by strong demand for mechanical and E-Series Ultrasonic meters, and a 12% organic growth excluding SmartCover contributions [4] - Flow instrumentation sales decreased by 5% year-over-year, but showed a 7% sequential increase from Q4 2024, indicating potential long-term growth [5] Strategic Developments - Badger Meter completed the acquisition of SmartCover on January 30, 2025, enhancing its smart water portfolio with advanced monitoring capabilities [2] - Customer feedback on SmartCover's integration has been positive, reinforcing the strategic value of the acquisition [2] Market Reaction - Following the strong performance, BMI's shares rose by 9.64%, closing at $201.63 on April 17, 2025, with a year-over-year gain of 11.3% compared to a 10.8% decline in the Zacks Instruments-Control industry [3] Outlook - The company anticipates a challenging year-over-year comparison in Q2 but remains optimistic about long-term growth, expecting continued high single-digit revenue growth [11]

Financial Performance - Net sales for Q1 2025 increased to $222,211,000, a 13.2% rise from $196,280,000 in Q1 2024[14] - Gross margin improved to $95,437,000, compared to $77,178,000 in the same period last year, reflecting a significant increase of 23.6%[14] - Net earnings for Q1 2025 were $38,398,000, up 31.8% from $29,131,000 in Q1 2024[14] - Earnings per share (EPS) for Q1 2025 were $1.31 (basic) and $1.30 (diluted), compared to $0.99 for both in Q1 2024[14] - Comprehensive income for Q1 2025 was $43,556,000, compared to $25,509,000 in Q1 2024, reflecting a growth of 70.8%[16] - Total operating earnings for Q1 2025 were $49.4 million, representing 22.2% of sales, compared to $36.6 million or 18.6% of sales in Q1 2024[85] - Gross margin for Q1 2025 was 42.9%, an increase from 39.3% in the prior year, benefiting from higher sales volumes and a favorable product mix[85] Assets and Liabilities - Total assets increased to $899,596,000 as of March 31, 2025, up from $816,413,000 at the end of 2024, marking a growth of 10.2%[12] - Cash and cash equivalents decreased to $131,358,000 from $295,305,000, a decline of 55.6%[12] - Total current liabilities rose to $141,017,000, an increase of 19.3% from $118,205,000 in the previous period[12] - The balance of contract liabilities increased to $90.6 million as of March 31, 2025, up from $78.3 million at the end of 2024[50] - Primary Working Capital (PWC) increased to $187.5 million (22.0% of sales) as of March 31, 2025, compared to $172.1 million (20.8% of sales) at the end of 2024[89] - Receivables rose by $27.5 million due to increased sales activity, while inventories increased by $6.0 million[89] Cash Flow - The company reported a net cash provided by operations of $33,027,000 for Q1 2025, compared to $21,460,000 in Q1 2024, an increase of 53.8%[19] - Cash provided by operations in Q1 2025 was $33.0 million, up from $21.5 million in Q1 2024, driven by higher net earnings[90] - Cash and cash equivalents decreased to $131.4 million from $295.3 million at the end of 2024, primarily due to $184.9 million used for the SmartCover acquisition[91] Dividends and Share Repurchase - The company declared dividends of $0.34 per share in Q1 2025, up from $0.27 per share in Q1 2024[14] - The company authorized the repurchase of up to 200,000 shares of common stock through February 2026, with no shares purchased in Q1 2025[102] Acquisitions and Investments - The total purchase consideration for SmartCover was $184.9 million, with $117.4 million allocated to goodwill that is not tax-deductible[34][35] - The company acquired SmartCover for $184.9 million, with revenue contribution of $6.2 million for the two months ended March 31, 2025[77][78] - The Company acquired select remote water monitoring hardware and software for $3.0 million effective January 1, 2024[36] - Property, plant, and equipment expenditures for Q1 2025 were $3.0 million, slightly higher than $2.7 million in Q1 2024[90] Market and Revenue Insights - Utility water market net sales reached $197.3 million, up 16.0% from $170.1 million in the prior year, driven by increased sales of mechanical and ultrasonic meters, ORION® Cellular endpoints, and BEACON® SaaS revenue[84] - The Company recognized $20.3 million in revenue over time, representing 9.1% of total revenue, compared to $12.7 million or 6.5% in the prior year[48] - The company continues to operate under a single segment, focusing on water and wastewater management solutions[45] - Approximately 40% of water meters installed in the U.S. have been converted to advanced metering infrastructure (AMI) systems[67][73] - The flow instrumentation product line accounted for approximately 12% of net sales in 2024, serving various industrial applications[70] - The company is expanding into international markets, including the Middle East and the UK, with its BlueEdge offerings[82] Taxation - The effective income tax rate for the Company was 24.4% for the three months ended March 31, 2025, compared to 23.5% in the prior year[42] - The provision for income taxes for Q1 2025 was 24.4%, compared to 23.5% in the prior year[86] Compliance and Internal Controls - The company remains compliant with all financial covenants as of March 31, 2025[92] - There were no material changes in the company's internal control over financial reporting during Q1 2025[98]

Financial Performance Highlights - Sales reached $222.2 million in Q1 2025, a 13% increase year-over-year (10% excluding SmartCover)[8, 9] - Operating profit margin hit a record 22.2%, with a 35% year-over-year growth in operating profit[8] - Earnings per share (EPS) grew by 31% year-over-year to $1.30 per share[8, 9] - Free cash flow increased by 60% year-over-year to a record $30 million[8, 9] - Gross margins improved by 360 bps due to favorable product and customer sales mix[7, 10] Segment Performance - Utility water sales increased by 16% (12% excluding SmartCover), driven by Cellular AMI adoption[10] - Flow instrumentation sales decreased by 5%, but showed sequential quarterly growth of 7%[10] Strategic Initiatives - Completed the acquisition of SmartCover, adding sewer and lift station monitoring to the BlueEdge® suite[8] Tariff and Supply Chain - The company is managing tariff-related exposures with mitigation efforts, with the estimated impact contained within the normalized gross margin range[11] - Rare earth mineral restrictions, specifically on bismuth, have led to cost increases impacting castings component costs[13]

Industry Overview - The Zacks Instruments – Control industry focuses on energy-efficient production processes and integrated software systems, with rising demand for advanced technology to replace legacy industrial controls expected to drive growth [1][4] - The industry includes manufacturers of precision and specialty motion-control components and systems, providing solutions for flow measurement, control, and communication across various sectors [3] Growth Drivers - Increased adoption of automation and higher investments in new technologies are anticipated to propel growth, particularly in North America, supported by rising infrastructural investments in energy and power sectors [4] - The pharmaceutical industry's process automation market is expanding due to cost factors and evolving regulations, indicating a shift towards high-quality equipment and partnerships with process control players [4][6] Challenges - Elevated customer inventory levels, high capital expenditures for infrastructure upgrades, and market volatility may negatively impact the process automation and instrumentation market [2] - Material cost inflation and rising transportation costs, exacerbated by geopolitical tensions, are affecting margins and production schedules, with companies struggling to pass on costs to customers due to competitive pressures [5] Technological Trends - The industry's growth is significantly driven by the emphasis on digitized technologies, including the Industrial Internet of Things, which enhances manufacturing processes and compliance with regulations [6] - Process instrumentation equipment is crucial for measuring key elements in industries such as chemicals, mining, and pharmaceuticals, contributing to improved product quality and emission reductions [6] Market Performance - The Zacks Instruments – Control industry has underperformed compared to the S&P 500 and the broader Zacks Computer and Technology sector, with a decline of 12.3% over the past year [9] - The industry currently holds a Zacks Industry Rank of 89, placing it in the top 36% of over 250 Zacks industries, indicating positive near-term prospects [7][8] Valuation Metrics - The industry has a trailing 12-month Enterprise Value-to-EBITDA (EV/EBITDA) ratio of 11.19X, lower than the S&P 500's 15.54X and the sector's 14.30X, suggesting potential undervaluation [11] Notable Companies - **Watts Water Technologies, Inc. (WTS)**: Focuses on water safety and flow control products, benefiting from cost-reduction actions and a strong balance sheet, with a long-term earnings growth expectation of 7.1% [14] - **Badger Meter, Inc. (BMI)**: Provides flow measurement and control solutions, known for accuracy and durability, with a long-term earnings growth expectation of 12.1% and a 20.2% gain over the past year [17][18] - **Thermon Group Holdings, Inc. (THR)**: Offers engineered industrial process heating solutions, expanding its market reach through acquisitions, with a consistent earnings surprise of 11.3% on average [21]

Financial Data and Key Metrics Changes - Total sales grew 13% year over year in Q1 2025, with a 10% increase excluding smart cover, following a 23% growth in Q1 2024 [9][10] - Operating profit margins reached a record 22.2%, expanding 360 basis points year over year, while gross profit margins improved to 42.9%, also a 360 basis point increase from the prior year [12][17] - Consolidated EPS increased by 31% to $1.30 from $0.99 in the prior year [17][18] - Free cash flow for the quarter was $30 million, up 60% from $18.8 million in the previous year [18] Business Line Data and Key Metrics Changes - Utility water product line sales increased by 16% year over year, or 12% when excluding smart cover revenue [10] - Sales for the flow instrumentation product line decreased nearly 5% year over year, although there was a sequential improvement of 7% from Q4 2024 [11] Market Data and Key Metrics Changes - Year over year growth in utility water was driven by cellular AMI adoption, including associated meters, Orion cellular endpoints, and beacon software [11] - The company noted strong positive feedback from customers regarding the integration of smart cover into their water management solutions [7] Company Strategy and Development Direction - The company aims to manage uncertainties related to tariffs and macroeconomic conditions while focusing on operational execution and supply chain management [19][27] - The acquisition of smart cover is expected to enhance the company's product offerings and drive sales and operating synergies [7][28] - The long-term average revenue growth outlook remains at high single digits with modest margin improvement over time [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the durability of their business model, particularly in the context of replacement-driven demand [46][72] - The evolving tariff situation and macroeconomic challenges are acknowledged, but the company believes it can manage these effectively [19][27] - The company remains debt-free and has ample capacity to invest in growth despite economic volatility [29] Other Important Information - The company was recognized on the Barron's list of 100 most sustainable companies for the third consecutive year [29] - Karen Bauer, the retiring Investor Relations Executive, was acknowledged for her contributions over 72 quarters [30][105] Q&A Session Summary Question: Can you provide more color on the favorable product and customer mix benefits? - Management indicated that while the margins are impressive, they are influenced by various factors, and some elements driving Q1 results may not be sustainable [40][42] Question: Are core customers showing signs of pulling back on spending? - Management reported no indications of customers pulling back, emphasizing the durability of the replacement-driven market [46][72] Question: What is the aggregate impact of tariffs on COGS? - Management stated that the situation is complex and variable, but they believe they can manage the impact through pricing actions [56][60] Question: How are municipal budgets affecting AMI investments? - Management noted that utilities often reprioritize budgets to ensure meter replacements are funded, even during budget constraints [71][72] Question: Are price increases already communicated to customers? - Management confirmed that price increases are forthcoming but have not yet been communicated to customers [94] Question: What caused the increase in receivables? - The increase was attributed to timing differences in sales between Q4 and Q1, along with the addition of smart cover [102]