Still Bullish On Brady

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Brady (BRC) reported fiscal 2022 fourth-quarter results on September 1. Hurt by pressure from unfavorable currency translation, which cut 5.7% from the top line, net sales for the period of $324.0 million came in $7.1 million below analysts’ expectations. But thanks to contributions from the acquisitions of Magicard Limited, Nordic ID and Code Corp. made in the prior-year quarter and strong organic growth of 9.0%, which benefited from prices increases, the continued rise in demand for its Identification Solutions, and improving results from its Workplace Safety business, this still represented solid year-over-year growth of 5.8%.

And with BRC’s actions to drive efficiency throughout its manufacturing facilities and a reduction in the use of more expensive air freight making up for the inflationary pressures it’s been seeing, adjusted earnings rose 16.0% to a record 87 cents per share and exceeded the consensus estimate by 2 cents.

BRC’s Stock Buyback Program

What’s more, this solid operating performance also led to the production of another $32.2 million in free cash flow, which allowed BRC to take advantage of its cheap share price to repurchase an additional $24.3 million of its common stock while still maintaining a net cash position of $19.1 million.

And while the midpoint of BRC’s guidance for fiscal 2023 adjusted earnings of $3.30-3.60 per share falls a little short of the $3.58 analysts are projecting, it still implies continued strong growth of 10% from the record $3.15 the company earned in fiscal 2022. It also suggests BRC is entering the new fiscal year (which began in August) with good operating momentum against the currently challenging macroeconomic backdrop that we believe will allow it to take advantage of the global trend towards increased factory automation and continue to drive strong cash flow generation in fiscal 2023 that leads to a much better year for its stock ahead as well.

Taesik Yoon is the editor of Forbes Investor.



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