Badger Meter widens margins while utility meter sales stand still in Q3

Badger Meter reported its third-quarter 2026 results on 22 October, covering the three months to 30 September. Total sales came in at $235.9 million, almost exactly level with the $235.7 million of a year earlier, but 6% higher than the second quarter.

The numbers

Utility water, the business that sells meters and metering systems to water utilities, was flat year on year. That figure includes $5.6 million from UDlive, which Badger bought on 1 May 2026. Strip the acquisition out and utility water sales were 3% lower than last year, though 5% up on the previous quarter. Flow instrumentation grew 2%.

Profit held up better than sales. Gross margin rose 120 basis points to 41.9%, operating earnings increased 4% to $47.7 million, and operating margin edged up to 20.2% from 19.6%. Diluted earnings per share were $1.24, against $1.19 a year ago.

The year-to-date picture is softer. Nine-month sales were $660.5 million, down from $696.0 million, and EPS fell to $3.19 from $3.65. That gap is the reason investors were watching for a turn in Q3.

What management said

Chairman, President and CEO Kenneth C. Bockhorst pointed to the ramp of utility water projects the company has already been awarded, and said Badger continues "to anticipate both sequential and year-over-year Base revenue improvement", with that growth expected to carry into 2027. He also flagged cost pressure from electronics supply chains and fewer operating days in the fourth quarter.

On the earnings call, as reported by The Motley Fool, management linked rising circuit board costs to AI data centre construction and said it was passing those costs on to customers. CFO Dan Weltzien described base gross margin of 42.1% as "at the top end of our normalized range."

Software and capital returns

Badger also added OneNetwork, a real-time network monitoring and analysis platform, to its BlueEdge suite. According to the call coverage, it brings metering, network monitoring and water quality data into one place, and Bob Wrocklage, EVP of North America Municipal Utility, pitched it as a faster way for utilities to spot and respond to problems.

The company bought back around $55 million of its own shares in the quarter and raised its annual dividend by 10% to $1.76 a share, its 34th straight year of dividend growth.

The bigger picture

For the waterworks channel, the message is that meter demand has paused rather than stalled. Utilities are still working through awarded AMI projects, suppliers are holding price despite component inflation, and the product pitch is shifting from hardware towards software that sits on top of the network. Mueller Water Products, the valve and hydrant maker, announced a bigger buyback on the same day, so two of the listed US suppliers in this part of the market are signalling confidence in their cash generation.