Here’s Why Shares in This Water Company Gushed Higher Today

Investors in water utilities are no strangers to steady performance, but few companies have delivered the kind of explosive growth Badger Meter Inc (NYSE: BMI) showcased this spring. On April 23, 2025, shares of the Wisconsin-based water infrastructure leader surged 10%—a move fueled by a confluence of catalysts that underscore its position as a leader in a critical, underappreciated sector.

The rally began days earlier on April 17, when Badger Meter reported first-quarter 2025 earnings that shattered expectations. Total sales rose 13% year-over-year to $141.5 million, while operating profit margins hit a record 22.2%, up from 19.8% in the prior-year period. Even more striking was the 31% jump in earnings per share (EPS) to $1.30, far exceeding the $1.08 consensus estimate.

The growth wasn’t just top-line. Badger Meter’s core utility water products—sensors, flow meters, and smart infrastructure—soared 16%, reflecting surging demand from municipalities and utilities. Meanwhile, software revenue from its 2024 acquisition of SmartCover (a provider of data analytics tools for water utilities) jumped 25%, proving the deal’s strategic value.

The Catalysts Driving the Surge

1. Tariff Mitigation Wins
Badger Meter’s Mexican manufacturing facility, a key supplier to U.S. utilities, was exempted from Section 232 steel tariffs under the U.S.-Mexico-Canada Agreement (USMCA). This removed a costly headwind, freeing up margins as the company avoids paying tariffs on $50 million in annual steel imports. Analysts at RBC Capital Markets noted this move alone could add 2-3% to 2025 earnings.

2. Smart Water Tech Adoption
The rise of “smart water” infrastructure—think real-time leak detection, usage analytics, and automated billing—is a secular trend, and Badger Meter is at its forefront. The SmartCover acquisition has been a linchpin here, enabling the company to offer end-to-end solutions.

3. Analyst Optimism
RBC raised its price target to $252 from $238, citing the tariff exemption and robust growth. While Stifel maintained a “Hold” rating, it upped its target to $220, acknowledging BMI’s resilience.

A Foundation of Stability

Beyond near-term catalysts, Badger Meter’s 55-year streak of dividend increases—32 consecutive annual hikes—is a testament to its financial discipline. The stock’s current dividend yield of 1.2% may seem modest, but it’s underpinned by a payout ratio of just 30% of earnings, leaving room for growth.

Why This Matters for Investors

The water utility sector is often overlooked, but it’s a $100 billion global market with structural tailwinds. Aging infrastructure, climate-driven demand for efficiency, and urbanization are all fueling spending on smart water systems. Badger Meter’s Q1 results and strategic moves position it to capitalize on this trend.

Critics may point to valuation—BMI trades at 24x forward earnings, above its five-year average of 20x—but the stock’s trajectory suggests investors are willing to pay a premium. With RBC’s $252 target now within sight and a backlog of orders up 18% year-over-year, the rally could have legs.

Conclusion: A Utility Stock With Tech’s Growth Profile

Badger Meter isn’t just a water meter maker—it’s a tech-enabled infrastructure leader in a sector that’s both recession-resistant and growth-oriented. Its Q1 results, tariff wins, and software-driven innovation create a compelling case. With a market cap of $5.9 billion and a 10-year average annual return of 14%, BMI isn’t just gushing higher today—it’s building momentum for years to come.

For investors seeking a mix of stability and growth, Badger Meter’s surge isn’t a flash in the pan. It’s a sign of the future.