Is BMI Stock Worth Buying After Its Q2 Earnings Beat and Pullback?

BMI's Q2 Beat Masks a Softer Revenue Base

Badger Meter reported second-quarter 2026 earnings of $1.02 per share, topping the Zacks Consensus Estimate of $1.01 by 1.0%. Revenues of $222.32 million beat the consensus mark of $221.06 million by 0.6%.

The beat is less convincing than the headline. Earnings fell 12.8% from the prior year, while revenues declined 6.6%, making the durability of the recovery more important than modest upside versus expectations.

Utility water sales fell 8%, or 9% excluding two months of UDlive, as advanced metering infrastructure deployments remained uneven. Flow instrumentation sales rose 6% on water-related demand.

Xylem Inc. XYL gives investors broader water technology exposure across water and wastewater applications. Itron, Inc. ITRI is relevant because it serves utilities with metering, communications and infrastructure solutions.

Badger Meter's Recovery Is Back-End Loaded

The strongest near-term positive was the 10% sequential increase in sales. Awarded utility projects began initial deployments, including PRASA and several others, while order rates improved from the first quarter.

Management expects base quarterly revenues to improve sequentially through the rest of 2026. Third-quarter sales are expected to rise from the second quarter, but year-over-year growth is expected to be heavily weighted toward the fourth quarter.

That timing matters. Full-year revenues excluding UDlive are still expected to be roughly flattish with 2025, and some awarded projects may not reach full run rates by year-end.

A larger project cohort provides more coverage, but customer schedules, installation timing and short-cycle municipal orders can still shift quarterly performance.

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BMI's Cash Position Supports Strategic Flexibility

Badger Meter generated free cash flow of $21.9 million in the quarter, down from $40.6 million a year earlier. Cash from operations was $26.71 million, while capital expenditures totaled $4.84 million.

The company ended June 2026 with $95.73 million in cash and an undrawn $150 million credit facility. This supports research, acquisitions, dividends and repurchases.

Liquidity is not the same as accelerating cash generation. Primary working capital rose to 22.9% of sales from 20.0% at the end of the first quarter, reflecting project timing.

BMI spent $94.38 million on acquisitions, $25.25 million on share repurchases and $11.59 million on dividends during the quarter. Management still targets full-year free cash flow conversion above 100% of net income.

Badger Meter's Valuation Leaves Little Room

BMI trades at 28.48 times forward 12-month earnings and 19.02 times trailing 12-month enterprise value to EBITDA. Both are below the company’s five-year medians of 44.85 and 29.02, respectively.

That discount to history does not make the stock inexpensive. The enterprise value to EBITDA multiple remains above the Zacks sub-industry at 9.23 times and the S&P 500 at 18.24 times.

The $141 price target is based on 28.1 times forward 12-month earnings. That embeds confidence in project execution, margin discipline and profitable acquisition integration.

The margin setup leaves limited room for another setback. Gross margin slipped 30 basis points to 40.8%, while operating margin fell 110 basis points to 17.7%. Electronic component costs remain pressure points.

End Note

The bottom line is that Badger Meter’s pullback alone is not enough to make the stock a buy. Sequential sales improvement, early project deployments and a flexible balance sheet support the stock, but weaker year-over-year results and margin pressure keep the risk-reward balanced.

A stronger case would require more consistent project shipments, margin stabilization and clearer evidence that UDlive and other acquired assets can become profitable contributors.

Currently, Badger Meter has a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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