Jefferies Initiates Badger Meter (BMI) with Buy Rating as Smart Water Demand Stays Intact

Core Viewpoint - Badger Meter, Inc. (NYSE:BMI) is recognized as a strong investment opportunity, particularly in the smart water metering sector, with a Buy rating initiated by Jefferies and a price target of $220, indicating confidence in the company's growth despite recent slowdowns [2][3]. Group 1: Company Performance and Growth - Badger Meter has a solid track record of acquisitions, completing 14 since 2010, which has reinforced its leadership in water technology [4]. - The company recently acquired SmartCover Systems for $185 million, and management is on track to achieve expected sales and cost synergies from this acquisition [4]. - Free cash flow (FCF) margins have significantly improved from approximately 6% in 2015 to around 18% today, driven by the expansion of software-as-a-service offerings [5]. Group 2: Dividend Growth and Financial Health - Badger Meter is positioned as a dividend growth story, with a current dividend yield of about 0.9%, utilizing only 25% of its FCF for dividend payments, allowing for potential future increases [6]. - The company has a history of raising its dividend for 33 consecutive years, indicating strong financial health and commitment to returning value to shareholders [6]. Group 3: Industry Position and Innovation - With over a century of innovation in water technology, Badger Meter provides comprehensive water management solutions through its BlueEdge suite, highlighting its industry expertise [7].