Currently, outside of the New England area, the name Brady is looked upon with a bit of disdain and envy, but we are talking about the Brady Corp (BRC) here, not Tom Brady.
While both have had a difficult past several months, Tom looks to have rebounded while Brady Corp is going to be in a difficult spot for the foreseeable future.
Today, the Brady Corporation is the Zacks Bear of the Day.
This Zacks Ranked #5 (Strong Sell) company manufactures and supplies identification solutions, specialty materials, and workplace safety products that identify and protect premises, products, and people in the United States and internationally.
It operates through two segments, Identification Solutions and Workplace Safety. The Identification Solutions segment offers safety signs, pipe markers, labeling systems, spill control products, and lockout/tagout devices for facility identification.
The Workplace Safety segment provides workplace safety and compliance products, such as informational signs, tags, security, safety and traffic compliance, first aid supplies, material handling, asset identification, safety and facility identification, and workplace regulatory products for process industries.
While Tom Brady has been dealing with deflated footballs, the Brady Corp has been dealing with deflating earnings and revenues for the past three quarters.
Specifically, BRC’s Q4 15 revenues declined in both segments; Identification Solutions -0.3%, and Workplace Safety -3.2%. Further, organic revenues declined -1.2%, and sales fell -8.9% q/q. On an annual basis, sales decreased -4.4%.
According to President and CEO J. Michael Nauman, “Our fourth quarter financial results did not meet our expectations. We realized an organic sales decline in our Identification Solutions business, and our gross profit margin deteriorated more than anticipated. We completed the facility consolidations this quarter, but we continue to face operational inefficiencies.”
These inefficiencies caused management to adjust their 2016 guidance to between $1.10 and $1.30, where the street was expecting $1.63.
As you can see in the Price and Consensus graph below, estimates for the first two fiscal quarters of 2016, FY 2016, and FY 2017 have all declined.
Overall, over the past 30 days, estimates for Q1 16, Q2 16, FY 16, and FY 17 have all decreased. Q1 16 fell from 41 cents per share to 28 cents per share, Q2 16 dropped from 36 cents per share to 21 cents per share, FY 16 plummeted from $1.52 to $1.14, and FY 17 decreased from $1.80 to $1.40.
The ID solutions segment’s biggest area of weakness was Brazil where operating margins declined because of operational issues due to facility consolidation in the Americas, and the Workplace Safety segment experienced weakness in US digital sales, and across the board weakness in Australia.
While management has some plans in place to combat this negative trend, there seems to be no short term solution to fix the issues facing the Brady Corporation.
If you are inclined to invest in the Protection and Safety segment, we would suggest looking into Lakeland Industries (LAKE), which carries a Zacks Rank #1, or NAPCO Security (NSSC), which carries a Zacks Rank #2.
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