Water control and measurement company Badger Meter (NYSE: BMI) missed Wall Street’s revenue expectations in Q1 CY2026, with sales falling 9% year on year to $202.3 million. Its non-GAAP profit of $0.93 per share was 24% below analysts’ consensus estimates.

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StockStory’s Take

Badger Meter’s first quarter was met with a pronounced negative market reaction, as the company’s sales and non-GAAP earnings fell short of analyst expectations. Management attributed the decline to two key factors: the completion of several large advanced metering infrastructure (AMI) projects, and weaker-than-expected short-cycle orders from utilities. CEO Kenneth Bockhorst described the revenue shortfall as primarily timing-related, emphasizing, “This first quarter outcome is timing-related and does not reflect a structural change in either market demand, our broader competitive position, or the long-term market drivers of our business.”

Looking ahead, management’s guidance for 2026 is shaped by expectations for a back-half recovery as newly awarded AMI projects begin deployment. Bockhorst highlighted the pipeline of projects representing 2.6 to 3.6 million connections over several years, which substantially exceeds the prior cohort that drove growth from 2023 to 2025. While the company expects sequential improvement in revenue as the year progresses, Bockhorst cautioned that “sequential improvement in absolute quarterly revenue dollars as the year progresses” is anticipated, but full-year revenue is likely to be flat with 2025, excluding the impact of the UDLive acquisition.

Key Insights from Management’s Remarks

Management attributed the first quarter’s underperformance to project completion timing and a temporary dip in short-cycle utility orders, while also emphasizing continued progress in software and network monitoring products.

• Project backlog normalization: The end of several major AMI projects led to a temporary revenue gap, as new awarded projects are only set to begin deployment later in 2026. This transition period created visibility into the inherent variability in Badger Meter’s project-driven business.
• Short-cycle order weakness: Orders from utilities for routine replacement and distribution, which are typically less predictable, were notably weaker than anticipated. Management stressed this was due to timing rather than any fundamental change in market demand or competitive pressures.
• Beyond-the-meter growth: Despite lower metering product revenue, segments like BEACON SaaS (software-as-a-service for utility analytics), SmartCover, and water quality/network monitoring products saw growth, helping partially offset declines elsewhere.
• Cost discipline and margin focus: In response to the volume decline, Badger Meter implemented measured cost reductions, including a 10% salary reduction for executives and continued focus on selling, engineering, and administrative (SEA) expense management. Gross margin, while down year-on-year due to product mix, remained near the top end of the normalized range.
• Acquisition of UDLive: The acquisition of UK-based UDLive extends Badger Meter’s capabilities in sewer line monitoring, pairing with SmartCover to establish global leadership in this emerging market. Management expects the deal to be accretive to earnings in year one and sees significant long-term potential as regulation and customer demand drive adoption.

Drivers of Future Performance

Management’s outlook for the rest of 2026 centers on the timing and execution of newly awarded AMI projects, short-cycle order recovery, and the integration of the UDLive acquisition.

• Back-half weighted project ramp: The company expects significant revenue contribution from the deployment of newly awarded AMI projects in the second half of 2026. These projects, representing between 2.6 and 3.6 million connections, are set to drive growth well beyond the recently completed project cohort. Delays in project starts could push some revenue into 2027, a risk acknowledged by management.
• Short-cycle order variability: Short-cycle utility orders remain the least predictable portion of the business. While management anticipates some recovery from the Q1 air pocket, persistent weakness could pose downside risk to the flat revenue outlook for the year. The company is not seeing signs of budget constraints or market share loss in this segment.
• Margin management and integration: Maintaining gross margin in the 39% to 42% range is a priority, with the mix of turnkey versus supply-only projects impacting variability. The integration of UDLive is expected to contribute positively to earnings and support the expansion of recurring software revenue, while continued SEA discipline is intended to protect operating leverage.

Catalysts in Upcoming Quarters

Looking forward, our analysts will be monitoring (1) the pace and timing of deployment for new AMI projects, particularly any slippage into 2027, (2) recovery trends in short-cycle utility orders and their impact on the overall revenue trajectory, and (3) the integration progress and early revenue contribution from the UDLive acquisition. Updates on recurring software and analytics adoption will also be critical indicators of long-term positioning.

Badger Meter currently trades at $116.25, down from $152.29 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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