On Monday, Baird issued an update on Badger Meter (NYSE:BMI) shares, increasing the price target to $184.00 from the previous $180.00, while keeping a Neutral rating on the stock.
This adjustment follows the company's performance on Friday, when shares closed down 1.8%, underperforming the Russell 2000's 0.6% decline. Badger Meter's stock had experienced a 5% drop during intraday trading, despite reporting strong second-quarter sales and earnings per share results.
The second quarter saw some benefit from a higher-than-usual backlog conversion, but the market's reaction seemed to be influenced by Badger Meter's guidance for the second half of 2024.
The company set its sales growth expectations around high single digits year-over-year, a deceleration after six consecutive quarters of over 20% growth. This forecast aligns with Badger Meter's long-term model and Baird's previous estimates for the latter half of the year, although it is more conservative compared to some other projections on Wall Street.
The firm also noted that the anticipated year-over-year margin expansion for the second half of the year is expected to be more moderate. Despite the tempered outlook for the near term, Baird believes that the long-term fundamentals for Badger Meter remain solid.
However, the firm suggests that investors might want to wait for a more favorable entry point before investing in the stock. The guidance provided by Badger Meter for the second half of the year seems to have been a key factor in the stock's recent performance and Baird's updated price target.
In other recent news, Badger Meter, Inc. reported a substantial 23% year-over-year growth in sales for the second quarter of 2024, with total sales reaching $217 million. The company also announced record operating margins and earnings per share (EPS), demonstrating strong cash flow growth.
During the earnings call, CEO Ken Bockhorst introduced BlueEdge, a suite of connected water management technologies, and released the annual sustainability report, highlighting the company's commitment to customer-driven sustainability and cost reduction.
These developments come alongside a strong order book and a robust opportunity pipeline, suggesting a bullish stance on the water industry's growth fundamentals. The company plans to continue investing in both organic and strategic growth avenues. However, CFO Bob Wrocklage acknowledged potential pressure from copper prices but remained committed to normalized gross margin ranges.
Badger Meter anticipates a high single-digit backlog conversion in the latter half of the year and expects modest operating margin expansion while continuing to invest in the business.
Notably, the introduction of BlueEdge could generate additional revenue streams, and the company's strong opportunity pipeline and order book signal potential future growth. These are recent developments that investors should consider.
InvestingPro Insights
Badger Meter's recent financial performance and Baird's updated price target bring to light several key metrics that are noteworthy for investors. According to InvestingPro data, Badger Meter holds a market capitalization of $5.6 billion, with a high price-to-earnings (P/E) ratio of 49.75, indicating a premium valuation compared to the market. The company's revenue growth remains robust, with a 24% increase over the last twelve months as of Q2 2024, showcasing its ability to expand its top line significantly.
InvestingPro Tips suggest that Badger Meter's financial strength is underscored by its ability to maintain more cash than debt on its balance sheet, providing a solid foundation for future growth. Additionally, the company has a proven track record of returning value to shareholders, having raised its dividend for 31 consecutive years and maintained dividend payments for 54 years. This consistent dividend growth, including a 20% increase in the last twelve months as of Q2 2024, may appeal to income-focused investors.
For those considering an investment in Badger Meter, it's worth noting that the stock is trading near its 52-week high, at approximately 94% of the peak value. While some may see this as a sign of strength, others may exercise caution, seeking a more advantageous entry point in line with Baird's recommendation. For additional insights, there are 11 more InvestingPro Tips available, which can be accessed using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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