Why Badger Meter Stock Is Plummeting 18% Lower This Week
Key Points
Badger Meter's sales and earnings per share dipped 7% and 13% as the company worked through project timing cyclicality.
These timing issues were already known from last quarter, but still seemed to weigh on the stock this week.
Investors need to monitor Badger's results closely over the next two quarters, but the stock could be a buy at its reasonable valuation.
- 10 stocks we like better than Badger Meter ›
Shares of leading smart water metering solutions provider Bader Meter (NYSE: BMI) are down 18% this week as of 1 p.m. ET on Friday after the company reported mixed second-quarter earnings on Wednesday. Sales and earnings per share dropped 7% and 13%, respectively, which ever-so-slightly top Wall Street's low expectations. However, despite sneaking past analysts' hopes, the stock still sold off, as the market had hoped for a bigger potential rebound in the second half of the year but only got "flattish" sales growth guidance for 2026.
Badger Meter stock is down 34% over the last year, but I view this as more of a buying opportunity than a major concern for a couple of reasons.
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First, Badger Meter was priced for perfection throughout most of the last five years, trading at an average of 42 times free cash flow (FCF). Its sales growth temporarily stalled and turned negative, leaving the company trading at a much more reasonable 24 times FCF.
Image source: Getty Images.
Second -- and while a shift from sales doubling between 2020 and 2025 to two straight quarters of declining revenue might seem jarring -- it shouldn't prove to be a long-term issue for Badger Meter. Instead, it seems to be a culmination of unfortunate timing issues (linked to government budgetary issues or delays) that have resulted in nine major utility projects being slated for deployment in the second half of 2026. Once these deployments take hold, Badger Meter's sequential sales growth should extend into the coming quarters, and investors should monitor it to ensure it happens.
Zooming out and removing this year's cyclicality and timing issues, Badger Meter's overall investment thesis remains in place, in my opinion. Water and metering infrastructure throughout the U.S. (and in many parts of the world where the company is expanding) need to not only be replaced but also often updated with Badger's advanced metering infrastructure.
Growing its dividend for 21 consecutive years while delivering 13% annualized total returns over the same period, Badger Meter remains an elite, steady-Eddie compounder, finally trading at a very reasonable price again.
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Josh Kohn-Lindquist has positions in Badger Meter. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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