Badger Meter Inc.'s shares sank Wednesday after the company, which makes products used by utilities, reported a dramatic drop in first-quarter profit.

THE SPARK: The Milwaukee company said its net income fell to $2.9 million, or 20 cents per share, for the period, from $6.2 million, or 42 cents per share, a year earlier. Its revenue fell nearly 6 percent to $71.8 million. The results fell far short of the 50 cents per share on revenue of $80 million that analysts polled by FactSet were expecting.

THE BIG PICTURE: Badger Meter said bad weather and uncertain municipal budgets hurt its sales to water utilities, which held off on new meter installation.

The company also said Tuesday that it bought Aquacue Inc., a small software technology company located in Los Gatos, Calif., for $14 million in cash. The company makes water management data software used by utilities and consumers to manage water usage.

THE ANALYSIS: Janney Capital Markets analyst Ryan Connors also noted that the company said utilities in Hurricane Sandy-affected areas have been slow to reboot meter replacement and upgrade programs. Still, despite these factors beyond Badger's control, the analyst said it was a decidedly poor quarter for Badger, representing the company's lowest first quarter earnings per share since 2007.

Connors said a silver lining on the dark quarter that was overlooked was Badger signing an exclusive agreement with Elster AMCO Water LLC, in which it will exit the mechanical water meter business in North America in June and recommend Badger Meter to its customers as the preferred supplier going forward.

The analyst maintained a "Neutral" rating on the company's stock.

SHARE ACTION: Badger shares fell more than 12 percent to $45.79 by midmorning Wednesday. The company's stock is in the middle of its 52-week trading range of $32.29 to $54.28.

 

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