GET DAILY SIGNALSBadger Meter (BMI) Shows Margin Strength in Q3 2026 Despite Flat Revenue
Key Takeaways
- Badger Meter reported third quarter 2026 earnings per share (EPS) of $1.24, up 4% from $1.19 a year earlier and modestly above consensus estimates.
- Net sales were $235.9 million, essentially flat year over year and slightly below analyst forecasts of roughly $240 million.
- Operating margin expanded to 20.2% from 19.6%, while gross margin climbed 120 basis points to 41.9% on a favorable product mix.
- The company raised its annual dividend by 10% to $1.76 per share, marking its 34th consecutive year of increases, and repurchased about $55 million of stock.
- Management expects sequential and year-over-year base sales growth in the fourth quarter and says it expects to sustain that momentum into 2027.
Earnings Context and Why It Matters
Badger Meter is a Milwaukee-based provider of flow measurement, water quality, and control technologies, and a leading player in the ongoing digital transformation of the water sector. Its third quarter 2026 results matter because they arrive after a choppy first half, during which uneven timing of utility smart-meter projects pressured sales. Investors are closely watching whether the company's shift toward higher-margin software, ultrasonic meters, and "beyond the meter" solutions can offset near-term revenue softness. The report also offers a read on electronic component cost pressures tied to the broader artificial intelligence and data-center build-out, which have squeezed input costs across the industrial technology landscape. I also checked this using Tickeron's AI Screener to see how the stock compares to others in the industry.
Reported Results
For the third quarter ended September 30, 2026, Badger Meter posted net sales of $235.9 million, essentially flat versus $235.7 million in the prior-year period and slightly below consensus expectations near $240 million. Diluted EPS rose 4% to $1.24, topping analyst estimates of roughly $1.22 to $1.23.
Profitability was the quarter's highlight. Operating earnings increased 4% to $47.7 million, lifting operating margin 60 basis points to 20.2%. Gross margin expanded 120 basis points to 41.9%, driven by a favorable mix shift toward ultrasonic meters and growing software-as-a-service revenue. Excluding the UDlive acquisition completed in May 2026, base gross margin reached 42.1%, the top of the company's normalized range.
Net earnings were $35.9 million, compared with $35.1 million a year earlier. Free cash flow was $40.3 million, down from $48.2 million, reflecting higher cash taxes. Flow instrumentation sales rose 2% year over year, supported by water applications and emerging data-center demand.
Market Reaction and Investor Sentiment
Shares of BMI rose roughly 7% in the session following the report, a notable move on a day when the broader Nasdaq traded lower. The rally signaled that investors chose to look past the modest revenue miss and focus instead on margin expansion, improving sequential momentum, and management's constructive commentary on the fourth quarter and 2027. The company said base sales, which exclude UDlive, rose 5% sequentially from the second quarter as previously awarded utility projects began to ramp, an inflection point after a difficult first half. The 10% dividend increase and continued share repurchases reinforced confidence in cash generation and shareholder returns.
Forward Outlook and Key Factors to Monitor
Management expects both sequential and year-over-year base sales growth in the fourth quarter of 2026, even with fewer operating days due to the holiday calendar, and anticipates sustaining that momentum into 2027. For the full year, organic revenue is now expected to decline in the low single digits, an improvement from earlier, more cautious guidance.
Several factors will shape the quarters ahead. First, the pacing of large utility smart-meter projects remains inherently uneven, and investors should watch whether awarded contracts convert to shipments on schedule. Second, electronic component costs and availability, driven by artificial intelligence and data-center demand, continue to pressure materials; the company has so far offset these through pricing and product mix, but the challenge persists.
Third, the structural shift toward higher-margin software and ultrasonic meters is a key margin lever, with management expecting gross margin to remain within its 39% to 42% range. Finally, the integration of recent acquisitions such as UDlive and SmartCover, along with the launch of the OneNetwork software platform, will be important indicators of the company's ability to expand beyond traditional metering. Investors will also monitor free cash flow conversion, which management targets at above 100% of net earnings. From what I see, these elements point to a company navigating near-term headwinds while positioning for longer-term gains.
Using AI Tools in My Research Process
I often turn to Tickeron's AI Daily Buy/Sell Signals when evaluating how earnings reports like this one might influence near-term trading patterns. It provides a quick way to cross-check signals across similar names in the industrial and water technology space without having to build extensive custom screens from scratch. This helps me stay focused on the fundamentals while adding another layer of data-driven context to the analysis.
Disclaimer
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Contributor
Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.
BMI saw its Stochastic Oscillator leaves the overbought zone
The Stochastic Oscillator for BMI moved out of overbought territory on October 15, 2026. This could be a bearish sign for the stock and investors may want to consider selling or taking a defensive position. A.I.dvisor looked at 63 similar instances where the indicator exited the overbought zone. In 40 of the 63 cases the stock moved lower. This puts the odds of a downward move at 63%.
Technical Analysis (Indicators)
Bearish Trend Analysis
Following a 3-day decline, the stock is projected to fall further. Considering past instances where BMI declined for three days, the price rose further in 50 of 62 cases within the following month. The odds of a continued downward trend are 58%.
The Aroon Indicator for BMI entered a downward trend on October 12, 2026. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on October 19, 2026. You may want to consider a long position or call options on BMI as a result. In 58 of 95 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are 61%.
The Moving Average Convergence Divergence (MACD) for BMI just turned positive on October 09, 2026. Looking at past instances where BMI's MACD turned positive, the stock continued to rise in 38 of 47 cases over the following month. The odds of a continued upward trend are 81%.
BMI moved above its 50-day moving average on October 21, 2026 date and that indicates a change from a downward trend to an upward trend.
Following a +4.44% 3-day Advance, the price is estimated to grow further. Considering data from situations where BMI advanced for three days, in 183 of 305 cases, the price rose further within the following month. The odds of a continued upward trend are 60%.
Fundamental Analysis (Ratings)
The Tickeron SMR rating for this company is 49 (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Price Growth Rating for this company is 58 (best 1 - 100 worst), indicating steady price growth. BMI’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron PE Growth Rating for this company is 74 (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Valuation Rating of 75 (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (5.597) is normal, around the industry mean (1.792). P/E Ratio (30.665) is within average values for comparable stocks, (7.746). Projected Growth (PEG Ratio) (2.931) is also within normal values, averaging (5.470). Dividend Yield (0.013) settles around the average of (0.011) among similar stocks. P/S Ratio (4.255) is also within normal values, averaging (32.028).
The Tickeron Profit vs. Risk Rating rating for this company is 84 (best 1 - 100 worst), indicating that the returns do not compensate for the risks. BMI’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 82, placing this stock worse than average.
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Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
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General Information
a maker of flow measurement and control products
Industry ElectronicEquipmentInstruments
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