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Badger Meter Profits Keep Flowing, up 29% in Q2

Badger meter is popping a nice 9% today on strong Q2 earnings. Compared to Q2 of 2007, Q2 2008 sales are up 20.1%, net earnings up 28.8%, and EPS up 26.3%. These results are in the face of what appeared to be a challenging environment for utility and industrial component suppliers. Chicago Bridge & Iron (CBI) confirmed the decrease in utility and local municipal spending (local municipalities have been hit by the credit crisis and the decrease in tax revenues due to rising foreclosures). However, Badger Meter showed us that water utilities are still buying the small infrastructure components such as meters and valves, even as larger projects such as those Chicago Bridge & Iron is involved in are being scrapped. This is another reminder of the big sea change I’ve been concerned with for a while: U.S. infrastructure is deteriorating fast and must be replaced and upgraded. If new big projects such as new utility stations or pipelines have to be canceled, that puts even more pressure on the existing system, requiring advanced technology such as Badger Meter’s AMR (Automatic meter reading) technology to make the existing system more efficient and reliable. Badger Meter also mentioned strength in precision valves and flow sensors due to the continued demand in the petroleum industry.

Also, Badger Meter’s recent acquisition of an automatic metering infrastructure (AMI) system is looking good. Watch for accelerating growth in this product line.

The majority of Badger’s sales are domestic, which is where the weakness concerns have been.  International infrastructure should still be strong across the board.  So if Badger can find strength in the U.S. domestic market, this is a good omen for both Flowserve (FLS) and SPX Corp (SPW), who are leaders in flow technology.

More on Badger Meter:

Additional Water Utility Resources featured on SuckingLess.com Research Tools

**Disclosure: I own shares of FLS and SPW as of this post**

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