Badger Meter shares jumped 4% Friday after Northcoast Research upgraded the water-technology company to Buy from Neutral, giving investors another reason to revisit a stock that has fallen roughly 25% this year despite management insisting the underlying utility demand picture remains intact.
The stock closed at $132.76 after trading as high as $134.56, with volume exceeding 1 million shares—several times its recent daily pace. Northcoast set a $148 price target, representing about 11.5% upside from Friday’s close, while the broader analyst average sits closer to $157.
That is materially different from saying Badger Meter is definitively 14% undervalued. The $155.11 fair-value estimate highlighted in the source comes from Simply Wall St’s own valuation framework rather than Northcoast’s research, and the stock still trades at roughly 31 times trailing earnings and nearly 28 times forward earnings even after its decline.
The stronger case for a rebound rests on what happens operationally during the second half of 2026. Badger Meter’s first-half results weakened as large advanced-metering projects moved between deployment phases, but management says several previously awarded projects are now beginning to ramp.
Second-Half Project Timing Has Become the Main Test
Badger Meter reported second-quarter sales of $222.3 million, down 7% from a record $238.1 million a year earlier but up 10% sequentially from the first quarter. Diluted earnings fell to $1.02 from $1.17, while operating income declined 12% to $39.4 million and operating margin narrowed to 17.7% from 18.8%.
The quarter was better than the first quarter, when sales fell 9% and operating earnings dropped sharply, but it did not mark a return to year-over-year growth. Utility water sales declined 8% in the second quarter as large AMI deployments remained uneven, while flow-instrumentation sales increased 6%. Excluding the recently acquired UDlive business, utility sales improved 8% sequentially but remained 9% below the prior year.
Management continues to describe the weakness as project timing rather than lost demand. Several major utility deployments that helped drive record revenue in 2025 have ended, while newer awarded projects are only beginning to move into full deployment.
That timing gap matters because utility advanced-metering projects can be large and uneven. A municipality may award a multiyear contract, but hardware shipments can fluctuate substantially from quarter to quarter as installation schedules, permitting and customer readiness change.
Badger Meter expects the revenue run rate to improve during the second half and continues to forecast full-year revenue excluding acquisitions roughly flat with 2025. That means the next two quarters have to show a meaningful acceleration from the first half if management’s explanation is correct.
Margins have held up better than the revenue decline might suggest. Second-quarter gross margin was 40.8%, only 30 basis points below the prior year and still within management’s normalized 39% to 42% range. Cost controls also reduced underlying selling, engineering and administrative expenses by about 6%, helping offset some of the operating leverage lost from lower sales.
The Long-Term Story Still Depends on Smart Water Adoption
Badger Meter’s larger investment thesis has not changed nearly as much as its 2026 share price.
The company is positioning itself less as a traditional meter manufacturer and more as a provider of connected water infrastructure. Its BlueEdge portfolio combines meters, cellular communications, monitoring equipment, analytics and recurring software that utilities use to track consumption, identify leaks and manage increasingly complex water networks.
At its May investor day, Badger Meter laid out a five-year framework calling for 6% to 8% annual revenue growth and 10% to 15% EPS growth. Management also expects gross margins to remain between 39% and 42%, with free cash flow conversion above 100%.
Those targets depend partly on continued adoption of cellular advanced-metering infrastructure, where utilities replace manually read or older radio-based meters with connected systems capable of continuously transmitting usage information.
Badger Meter is also pushing beyond the meter itself into areas such as sewer monitoring, water quality and pressure management. That broadens the amount of revenue the company can generate from each utility relationship and increases the role of recurring software.
The April acquisition of UDlive fits that strategy. Badger Meter paid approximately $94.4 million net of cash for the U.K.-based sewer-monitoring business, with another potential $50 million earnout tied to future EBITDA targets. UDlive generated about $22 million of revenue in its most recent fiscal year and complements Badger Meter’s existing SmartCover sewer-monitoring operation.
The balance sheet gives management room to continue investing. Badger Meter ended June with $95.7 million of cash and no conventional long-term debt listed on its balance sheet, while maintaining more than $150 million of unused credit capacity. First-half operating cash flow was $60.6 million, with cash also deployed toward the UDlive acquisition, $63.5 million of share repurchases and $23.3 million of dividends.
The company raised its quarterly dividend another 10% in August to $0.44 a share, marking its 34th consecutive year of annual dividend increases.
The Valuation Still Requires a Recovery
Friday’s rally does not make Badger Meter inexpensive by conventional earnings measures. At roughly 31 times trailing earnings, investors are still paying a sizable premium for the company’s historical growth, high returns on capital and exposure to a long-duration water-infrastructure upgrade cycle.
The stock’s 2026 decline has simply reduced that premium. Shares remain roughly 35% below their 52-week high of $204, even after Friday’s gain, while trailing revenue and earnings remain below last year’s levels.
That leaves the Northcoast upgrade dependent on a relatively straightforward operational assumption: the first-half slowdown needs to prove temporary.
The next earnings report should provide the clearest evidence. Investors will be watching whether awarded AMI projects move deeper into deployment, whether utility water revenue returns to sequential growth and whether the company’s cost controls keep operating margins near long-term levels as sales recover.
If those deployments accelerate as management expects, the 2026 earnings decline could look like a temporary project-timing issue inside a much longer smart-water growth cycle. If revenue remains weak into the fourth quarter, Badger Meter’s nearly 28-times forward earnings multiple will become harder to justify regardless of how far the shares have already fallen.