Badger Meter Q2 2025 slides: growth slows to 10% as stock tumbles on earnings

Introduction & Market Context

Badger Meter Inc (NYSE:BMI) shares plunged 10.7% on Tuesday after the water metering and flow measurement company reported its second-quarter 2025 financial results, despite posting year-over-year growth in sales and earnings. The stock was trading at $218.97 as of this writing, with pre-market trading indicating a decline of 5.74%.

The negative market reaction comes despite Badger Meter reporting sales growth of 9.9% and EPS growth of 4.5% compared to the same period last year. However, the results show a notable deceleration from the company’s first-quarter performance, when it reported 13% revenue growth and a significantly higher operating margin.

Quarterly Performance Highlights

Badger Meter reported second-quarter sales of $238.1 million, representing 9.9% growth compared to $216.7 million in Q2 2024. Excluding the contribution from the recently acquired SmartCover business, organic growth was approximately 5%, marking a significant slowdown from previous quarters.

As shown in the following chart of quarterly sales growth trends, Badger Meter has experienced a gradual deceleration from the 23% growth seen in Q2 2024:

The company’s earnings per share increased 4.5% to $1.17, compared to $1.12 in the prior-year period. This represents a sequential decline from the $1.30 EPS reported in Q1 2025, which may have contributed to investor disappointment.

Operating margin contracted by 40 basis points year-over-year to 18.8%, down from 19.2% in Q2 2024. This also represents a significant sequential decline from the 22.2% operating margin achieved in Q1 2025, suggesting potential pressure on profitability.

Detailed Financial Analysis

A closer examination of Badger Meter’s financial performance reveals mixed results across key metrics. While gross margin improved by 170 basis points to 41.1%, selling, engineering, and administrative (SEA) expenses increased by 200 basis points to 22.2% of sales, offsetting the gross margin gains.

The detailed financial snapshot below highlights the company’s performance across key metrics:

Free cash flow was a bright spot, increasing 19.1% year-over-year to $40.6 million. This strong cash generation provides the company with financial flexibility for investments and potential acquisitions.

According to the presentation, utility water sales increased year-over-year, while flow instrumentation sales remained flat. This suggests that the company’s core water utility business continues to perform well, while industrial markets may be facing challenges.

Strategic Initiatives

Badger Meter highlighted the momentum of its BlueEdge platform, which was launched one year ago. The company showcased the platform at the ACE25 tradeshow, demonstrating various use cases and introducing new features including a Field App for BEACON access and Cobalt for machine-learning insights.

The BlueEdge platform represents Badger Meter’s strategic push to expand beyond hardware into software and analytics, providing a more comprehensive solution for water utilities and industrial customers:

Sustainability remains a key focus area for Badger Meter. The company’s 2024 Sustainability Report highlighted several achievements, including exceeding greenhouse gas intensity reduction targets with a 55% reduction since 2020, reducing internal water usage intensity by 30% year-over-year, and improving employee engagement metrics.

The company has set a new goal of reducing future greenhouse gas intensity by an additional 30%, using 2024 as the baseline:

Forward-Looking Statements

Despite the market’s negative reaction to the Q2 results, Badger Meter maintains a positive outlook on its long-term growth prospects. The company cited several factors supporting its optimism, including its position as an innovation leader with expanding technology offerings, durable macro trends supporting smart water solution adoption, and strong cash flow and borrowing capacity.

The company’s outlook and value creation strategy is summarized in the following slide:

For investors seeking additional context on the company’s financial performance, Badger Meter provided reconciliations between GAAP and non-GAAP metrics, including EBITDA and free cash flow:

Analyst Perspectives

The market’s negative reaction to Badger Meter’s Q2 results suggests that investors may be concerned about the company’s slowing growth trajectory and margin compression. The sequential decline in performance from Q1 to Q2 2025 is particularly notable, as Q1 had shown stronger growth and record margins.

While Badger Meter continues to benefit from the durable nature of the water utility market and its strategic expansion into software solutions, the company faces challenges including potential tariff impacts, input cost pressures, and economic uncertainties that could affect customer spending.

The company’s next earnings release is tentatively scheduled for October 21, 2025, which will provide further insight into whether Q2 represents a temporary slowdown or the beginning of a more prolonged growth deceleration.

Full presentation:

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