Brady Corporation BRC seems to have lost its growth momentum to the pandemic. Notably, the company’s price performance has been weak and its earnings estimates have also been lowered lately, which point toward bearish sentiments for the stock.
The company, based in Milwaukee, WI, has a market capitalization of $2.4 billion and a Zacks Rank #5 (Strong Sell) at present. It belongs to the Zacks Security and Safety Services industry, currently at the bottom 37% (with the rank of 160) of more than 250 Zacks industries. Notably, the industry comes under the ambit of the Zacks Industrial Products sector.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In third-quarter fiscal 2020 (ended Apr 30, 2020), the company’s earnings were in line with the Zacks Consensus Estimate, while its sales surpassed the same by 7.4%. However, on a year-over-year basis, its earnings declined 27.7% on weak sales performance and high income taxes.
Year to date, the company’s shares have fallen 20.8% compared with the industry’s decline of 12.3%.
Factors Affecting Investment Appeal
Pandemic-Related Woes: Brady suffered from the adverse impacts of the pandemic in third-quarter fiscal 2020. Its sales in the quarter declined 8.2% year over year, with organic sales down by 6%. The performance was weak for both Identification Solutions and Workplace Safety segments. Geographically, organic sales for the Identification Solutions segment declined in Europe and the Americas, offset by growth in Asia. Moreover, Workplace Safety’s organic sales decreased in the Americas, partially offset by gains in Australia and Europe.
The company is wary about the uncertainties related to the coronavirus outbreak and so suspended previously provided projections for fiscal 2020 (ending July 2020).
The Zacks Consensus Estimate for the company’s revenues is pegged at $262.1 million for fourth-quarter fiscal 2020 (ending July 2020), suggesting a decline of 11.2% from the year-ago reported number. The revenue estimate for fiscal 2020 (ending July 2020) pegged at $1.09 billion suggests a 5.9% decline from the previous year’s reported figure.
Woes Related to International Presence: The company has a diversified business structure, having operations in multiple countries. The diversification has exposed it to geopolitical issues, macroeconomic challenges and unfavorable movements in foreign currencies. In the fiscal third quarter, forex woes adversely impacted the company’s sales by 2.2%.
Bottom-Line Estimate Trend: The Zacks Consensus Estimate for Brady’s earnings has moved downward in the past 60 days. The consensus estimate for earnings is currently pegged at $2.24 for fiscal 2020 and $2.58 for fiscal 2021 (ending July 2021), suggesting a decline of 14.2% and 7.2% from the 60-day-ago numbers. Notably, two downward revisions each was recorded for the years in the past 60 days.
Also, earnings estimates for fourth-quarter fiscal 2020 are pegged at 56 cents, reflecting a decline of 20% from the 60-day-ago number. Notably, one downward revision was recorded in the past 60 days.
Brady Corporation Price and Consensus
Brady Corporation price-consensus-chart | Brady Corporation Quote
Brady’s Performance Versus Three Industry Peers
The company has underperformed three peers since the beginning of 2020. Three such stocks are Lakeland Industries, Inc. LAKE, Axon Enterprise, Inc. AAXN and ADT Inc. ADT, with respective year-to-date growth of 112.6% and 35.6%, and decline of 0.3%, respectively.
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