Water control and measure company Badger Meter (NYSE: BMI) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 9.9% year on year to $238.1 million. Its non-GAAP profit of $1.17 per share was 6.7% below analysts’ consensus estimates.

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StockStory’s Take

Badger Meter’s second quarter results were met with a negative market reaction, reflecting investor concern over profitability despite revenue exceeding Wall Street forecasts. Management attributed the sales growth to ongoing adoption of its technology solutions, including higher sales of meters, water quality, and remote monitoring offerings. However, CEO Kenneth Bockhorst and CFO Robert Wrocklage highlighted that difficult comparisons to the prior year, increased operating expenses from the SmartCover acquisition, and tariff-related cost pressures weighed on margins and earnings.

Looking ahead, Badger Meter’s leadership emphasized a continued focus on technology-driven solutions and integration of new services to support long-term growth. Management cited a robust project pipeline, increasing customer demand for advanced water management platforms, and secular trends in utility investment as key factors supporting their outlook. Bockhorst cautioned that “quarter-to-quarter results can be uneven,” and noted that ongoing trade and policy uncertainty, as well as the timing of major project deployments, could impact the pace of sequential growth.

Key Insights from Management’s Remarks

Management credited technology adoption and strategic investments for the quarter’s revenue growth, but noted that integration costs and trade-related headwinds limited earnings upside.

• SmartCover acquisition impact: The addition of SmartCover contributed to higher sales but also led to increased operating expenses, especially in selling, engineering, and administrative costs (SEA). Management pointed out that SmartCover’s cost structure is above line average, with intangible asset amortization and integration costs factored in.

• Technology adoption momentum: Revenue growth was driven by higher meter sales and expanding adoption of BEACON Software as a Service and water quality solutions. Bockhorst highlighted customer interest in the BlueEdge platform, which extends management capabilities beyond basic metering to comprehensive water and wastewater system oversight.

• Tariff and commodity cost headwinds: CFO Robert Wrocklage noted ongoing trade-related uncertainties, particularly around tariffs and copper prices, which put pressure on gross margins. While recent price increases partially offset these costs, management said the environment remains “fluid.”

• Uneven project timing: The company saw some Advanced Metering Infrastructure (AMI) projects conclude this quarter, with new projects scheduled to start later. This led to sequential variability and management expects total sales to decline in the next quarter before resuming growth.

• Operational excellence and process improvements: Despite the challenges, Badger Meter kept gross margins above its normalized range through ongoing efficiency initiatives and selective pricing actions, though management left its long-term margin targets unchanged due to the unpredictable cost environment.

Drivers of Future Performance

Management expects long-term growth to be supported by technology adoption, but notes tariff pressures and project timing will drive near-term financial variability.

• Integration of SmartCover solutions: Management views SmartCover’s sewer monitoring technology as a long-term growth lever, with very low digital adoption rates in the target market. The focus is on commercial synergies and leveraging Badger Meter’s existing customer base, with expectations for improved sales efficiency over time as integration progresses.

• Tariff and commodity cost uncertainty: The outlook is clouded by ongoing uncertainty in trade policy and commodity pricing, especially copper. While some cost pressures have been mitigated through price increases, Wrocklage emphasized the inability to predict future tariff impacts, which may affect both margins and pricing strategies.

• Project pipeline and funding environment: Management cited a robust funnel of upcoming AMI and water management projects, supported by persistent utility investment in infrastructure. Bockhorst mentioned that customer demand remains steady despite concerns about potential cuts to federal funding, as utilities can access capital through multiple channels.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will monitor (1) the pace of SmartCover integration and realization of commercial synergies, (2) Badger Meter’s ability to manage tariff and commodity cost headwinds while protecting margins, and (3) the timing and scale of new AMI and water management project deployments. Progress on digital adoption and execution of the BlueEdge platform will also be key indicators of long-term competitive positioning.

Badger Meter currently trades at $189.92, down from $245.59 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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