Badger Meter (NYSE: BMI) reported Q3 EPS of $0.46, $0.05 better than the analyst estimate of $0.41. Revenue for the quarter came in at $110.6 million versus the consensus estimate of $109.68 million.

Operating Results

“We are pleased with the results achieved in our third quarter, with record net sales for a third quarter, and an all-time record for adjusted EPS at $0.46 driven by higher domestic municipal sales of our flagship products, favorable sales mix, as well as continued international sales momentum, most notably in the Middle East,” said Richard A. Meeusen, chairman and chief executive officer of Badger Meter.

“Water utility sales grew mid-teens on both strong domestic residential and international sales, including further penetration of our E-Series® Ultrasonic water meters and ORION® Cellular endpoints. Sales of flow instrumentation products declined modestly in the third quarter against a strong comparison, with growth in key target markets, such as water & wastewater, offset by lower sales to de-emphasized end markets,” Meeusen continued.

“Gross profit margin improved 270 basis points to 39.7% in the third quarter of 2018 compared to 37.0% in the comparable prior year quarter. In order of contribution, the improvement was the result of the higher sales volumes, favorable utility sales mix and pricing.

Selling, engineering and administration expenses in the third quarter were $3.5 million higher on a year-over-year basis due primarily to $2.1 million of executive retirement charges, higher sales and incentive compensation as well as continued investments in research and development activities.”

Meeusen concluded, “Overall, I am extremely pleased with our results and execution on a number of fronts as we capitalize on favorable market momentum and leading technology offerings. I want to thank the outstanding Badger Meter employees across the globe for their customer focus and commitment.”

As previously announced, the company made the decision to terminate its pension plan. The third quarter and year-to-date results include the impact of the principally non-cash pension settlement charge of $11.7 million ($8.7 million or $0.29 per share after-tax) and $19.9 million ($14.8 million or $0.50 per share after-tax), respectively. In addition, in the third quarter, the company incurred a $2.1 million ($2.0 million, or $0.07 per share after-tax) non-cash charge for the immediate vesting of equity and cash awards in conjunction with Meeusen’s pending retirement.

Outlook

“We are optimistic about the remainder of the year and into 2019 for a number of reasons, including a solid backlog, continued customer acceptance of our new products, as well as the moderation of copper prices,” said Kenneth C. Bockhorst, president of Badger Meter. “In addition, we continue to advance our various innovative technologies, including D-Flow ultrasonic technology, which has the dual benefit of providing additional features for our customers while also improving our cost position.”

Bockhorst continued, “We believe the accelerating acceptance of our chosen technologies, continued operational efficiencies and an unrelenting eye on innovation bodes well for our future. Our participation in the AT&T Smart City Alliance is a prime example, where we continue to gain further insight into the tremendous opportunities in smart water solutions for utilities. We are excited about the many opportunities ahead to deliver superior shareholder value through both organic and inorganic investments facilitated by the strength of our balance sheet.”

For earnings history and earnings-related data on Badger Meter (BMI) click here.