Why Is Badger Meter (BMI) Up 8.1% Since Last Earnings Report?

Core Viewpoint - Badger Meter's recent earnings report showed mixed results, with a slight miss on EPS estimates but positive year-over-year growth in both EPS and net sales, indicating ongoing demand for its smart water management solutions [2][3][4]. Financial Performance - In Q4 2025, Badger Meter reported EPS of $1.14, missing the Zacks Consensus Estimate by 0.9%, but up from $1.04 in the same quarter last year [2]. - Quarterly net sales reached $220.7 million, a 7.6% increase from $205.2 million year-over-year, driven by higher utility water sales, although it fell short of the $230.8 million consensus estimate [2]. - For the full year 2025, sales totaled $916.7 million, reflecting an 11% year-over-year increase, while EPS rose approximately 13% to $4.79 from $4.23 in 2024 [3]. Operational Highlights - Management noted double-digit revenue growth, expanded profit margins, and record free cash flow conversion in 2025, supported by sustained demand for smart water management solutions [4]. - The successful completion of several Advanced Metering Infrastructure (AMI) projects and new projects set to begin in 2026 highlight the value proposition of Badger Meter's cellular AMI solution [5]. Segment Performance - Utility water sales increased by 9% year-over-year, with a 2% rise even when excluding SmartCover, driven by customer adoption of digital smart water solutions [7]. - Flow instrumentation sales remained flat year-over-year, as growth in water-focused end markets was offset by declines in de-emphasized applications [8]. Profitability Metrics - Gross profit for Q4 was $93 million, up from $82.8 million in the prior year, with a gross margin of 42.1%, an increase of 180 basis points year-over-year [9]. - Operating earnings rose around 10% year-over-year to $43.1 million, with operating margin expanding to 19.5% from 19.1% [9]. Cash Flow and Liquidity - In Q4 2025, Badger Meter generated $54.8 million in net cash from operating activities, compared to $52.1 million a year ago [12]. - As of December 31, 2025, the company had $226 million in cash and cash equivalents, with total current liabilities of $150.7 million [12]. Strategic Initiatives - The acquisition of SmartCover in early 2025 enhanced Badger Meter's portfolio with sewer monitoring and stormwater management capabilities, strengthening its long-term growth position [6]. - Badger Meter was selected to modernize Puerto Rico's water infrastructure, deploying its cellular AMI solution to improve operational efficiency and reduce non-revenue water for approximately 1.6 million service connections [11]. Future Outlook - Management expressed confidence in achieving high single-digit sales growth and continued operating margin expansion over the next five years, supported by the growth of its cellular AMI installed base and international expansion opportunities [13]. - However, estimates for the stock have been trending downward, indicating a potential below-average return in the coming months [15][17].