Badger Meter (BMI) recently reported its fourth quarter results. The company reported earnings of 34 cents per share, which is below the Zacks Consensus Estimate of 37 cents per share as well as the prior-year EPS of 42 cents.
Quarterly sales declined 16.6% to $56.4 million from $67.6 million in the fourth quarter of 2008. The company said that the sales were down across most of the product lines due to economic downturn and slowdown in customer purchases as they wait for federal funds.
Products sold for water applications, which constitute more than 88% of total revenue, declined 16.4% compared to the fourth quarter of 2008 due to lower unit volumes. Customers are postponing purchasing decisions while they wait to see if they can receive federal funds for infrastructure improvements.
However, gross margin improved to 36.4% in the reported quarter, compared to 35.7% in the comparable quarter of 2008 due to lower commodity costs pricing discipline and ongoing cost reduction efforts.
For the full year, Badger Meter reported earnings of $1.79 per share on sales of $250 million, compared to earnings of $1.69 per share on sales of $280 million. Despite a 10.5% decline in sales, earnings during 2009 were higher than 2008 as the company benefited from lower commodity costs, ongoing cost reduction efforts, and pricing discipline.
We expect the weakness in the utility as well as industrial markets to continue in the near term. However, we see significant long-term growth opportunities for the company as water utility customers upgrade to advanced metering (AMR/AMI) systems from manually read meters.
Badger Meter continues to invest in new products and technologies to meet evolving customer needs. The company believes that its operating cash flows and its ability to raise capital will provide adequate resources to fund ongoing operations and new product developments.
We maintain a Neutral rating on the stock.
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