Shares of leading utility water and sewer smart metering specialist Badger Meter (BMI 1.68%) dropped 19% Friday as of noon ET, following the company's painful-looking first-quarter results. Badger Meter's Q1 sales and earnings per share sank 9% and 29%, respectively, and both figures were well below Wall Street's expectations. Following today's drop, the company is down 37% over the last year.

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NYSE: BMI

Badger Meter

Today's Change

(-1.68%) $-2.37

Current Price

$138.51

Key Data Points

Market Cap

$4.0B

Day's Range

$137.26 - $141.08

52wk Range

$112.09 - $249.56

Volume

27.4K

Avg Vol

614.3K

Gross Margin

41.37%

Dividend Yield

1.15%

Badger Meter is one of my largest core holdings, so these figures were a bit jarring at first glance. However, today's results are far from a death knell for the company, and I believe management laid out a reasonable explanation for what happened during the quarter.

From 2023 to 2025, Badger Meter's sales benefited from four major projects in Jacksonville, Orlando, Pinellas County, and Galveston, which added over 800,000 new water connections. While the boom from these projects was great, they all ended roughly at the same time, which is the primary culprit behind Q1's sudden sales dip. Chief Executive Officer Kenneth Bockhorst explained, "The year-over-year decline in revenue and associated operating leverage are related to variability in project timing and short-cycle customer order patterns and do not reflect a change in underlying demand, our competitive position, or the long-term market drivers for our business."

Image source: Getty Images.

Better yet, investors shouldn't have to wait long for a turnaround, as management believes sales will rise sequentially throughout the year to roughly equal 2025's levels. Furthermore, Badger has 2.6 to 3.6 million connections from projects that will begin deployment in the second half of 2026, which should provide a solid sales rebound. Most importantly, from a higher-level, longer-term perspective, Badger Meter's operations should have numerous decades-long tailwinds working in its favor.

Badger Meter benefits from:

• the need to replace aging metering infrastructure
• the modernization of utility water and sewer operations
• stricter regulations
• water scarcity and water safety often requiring continuous monitoring
• a booming software business, powered by this live monitoring

Now trading at 21 times free cash flow -- compared to its five-year average of 43 -- Badger Meter remains an outstanding buy in my eyes.