Badger Meter (NYSE: BMI) reported Q1 EPS of $0.37, $0.01 worse than the analyst estimate of $0.38. Revenue for the quarter came in at $104.88 million versus the consensus estimate of $111.46 million.

• Net sales for the first quarter of 2019 were $104.9 million, level with the prior year’s sales of $105.0 million in the first quarter of 2018.
• Net earnings and diluted earnings per share (EPS) were $10.8 million and $0.37, respectively, compared to $7.5 million and $0.26 in the comparable prior year period, a 42% year-over-year EPS increase.
• $17.8 million of cash provided by operations representing strong earnings conversion.
• Announced meaningful technology wins with Columbia, SC and Aurora, CO which demonstrate the increasing market acceptance for cellular as the standard Advanced Metering Infrastructure (AMI) solution of choice for water utilities.

“While we experienced outstanding improvement in profitability year-over-year, our first quarter sales were modestly impacted by inclement weather and deferred orders by customers awaiting our next generation large static meters and LTE-M radio products. This typical uneven demand pattern does not deter our view on the overall market environment which remains solid, as evidenced by the two sizable smart water contract awards we recently announced with Columbia, SC and Aurora, CO,” said Kenneth C. Bockhorst, President and Chief Executive Officer of Badger Meter.

Municipal water sales increased 1% over the prior year. Extreme weather during the early part of the quarter, coupled with customers’ deliberate deferral of orders to obtain the latest version of advanced technology products including the commercial E-Series® Ultrasonic water meters and ORION® Cellular endpoints impacted the timing of orders and shipments. Sales of flow instrumentation products were 3% lower year-over-year, with unfavorable foreign currency rate changes negatively impacting the comparison, while further channel penetration in key target markets were offset by lower sales in certain de-emphasized end markets.

Operating margins improved 420 basis points year-over-year to 13.7% in the first quarter of 2019 from 9.5% in the comparable prior year quarter. Gross profit margins were strong at 38.6%, a 360 basis point increase over the prior year’s 35.0% despite the flat sales volume. Gross profit benefitted from both positive sales mix and price/cost dynamics. In addition, the prior year included facility shutdown costs which did not reoccur.

Selling, engineering and administration (“SEA”) expenses in the first quarter of 2019 of $26.1 million were slightly lower than the prior year’s $26.8 million, and as a percent of sales, SEA leverage improved 60 basis points. The tax rate of 23.5% was slightly higher than the prior year’s 22.2%.

Bockhorst continued, “Overall, I am pleased with the market recognition and adoption of our leading technologies, our profit expansion and the ongoing focus on continuous improvement. I want to thank the entire Badger Meter team for their efforts and dedication to serving customers and enhancing profitability.”

Outlook

“Our backlog and order rates remain solid, underscored by a high level of interest in our proven, innovative smart water solutions, including our newly launched larger size E-Series Ultrasonic meters and ORION Cellular LTE-M radios. We continue to leverage our expanded technology offerings across our extensive installed base, delivering significant value to our customers.” Bockhorst concluded, “We have a healthy balance sheet for potential tuck-in acquisitions aligned with our key growth initiatives, and we are well-positioned to deliver improving sales and earnings growth while helping to preserve the world’s most precious resource.”

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