Badger Meter (BMI) Post-Earnings Follow-Up – SELL
Badger Meter (BMI) reported a good quarter earlier yesterday and shares were up nicely in the early going, then faded as the market headed south later in the day. I had a chance to review the conference call and think through management commentary. My takeaway is they are trying to subdue expectations for next quarter and next year. Management said it’s not out of the question that there would be a sequential decline in Q4 (i.e., revenue down from Q3) and that, while they have grown in the double digits for a few years, the longer-term average growth rate is still expected to be in the high single digits. That implies growth could be in the low single digits at times. Now, to be perfectly clear, we weren’t expecting 10%+ growth next year. But I was expecting there could be a little more wiggle room to the upside, so to speak. I think the reality is that, without any information to go on (management declined to give any specific guidance), this was a “meh” report and not one that’s going to light a fire under BMI. With so many other stocks having pulled back this week I think it’s a good time to step aside from BMI and prepare to deploy the capital elsewhere. SELL
