Brady Corporation BRC can currently be considered a smart choice for investors seeking exposure in the security and safety services space. It boasts solid growth prospects, evident from positive revision in its earnings estimates, and has solid fundamentals.
This Milwaukee, WI-based company currently carries a Zacks Rank #2 (Buy) and has a VGM Score of B. It belongs to the Zacks Security and Safety Services industry, which belongs to the broader Zacks Industrial Products sector.
We believe that growing awareness for safety and security of work facilities, and workers as well as innovation and high industrial activities, especially in emerging nations, are benefitting the security and safety services providers.
Below we discussed why it is worth investing in Brady.
Healthy Performance and Solid Growth Prospects: The company performed well in the past four quarters, surpassing estimates in all occasions. It has a positive earnings surprise of 9.67%, on average, for the last four quarters. Notably, its earnings of 70 cents per share surpassed the Zacks Consensus Estimate by 9.38% in the first quarter of fiscal 2020 (ended October 2019).
For fiscal 2020 (ending July 2020), the company anticipates gaining from improved efficiency at manufacturing facilities, lower tax rates and solid product offerings. It now expects earnings per share of $2.50-$2.60, higher than the previously mentioned $2.45-$2.55. Organic sales are predicted to grow 1.5-2.5%.
Rewards to Shareholders: Brady is committed toward rewarding shareholders handsomely through dividend payments and share buybacks. In fiscal 2019 (ended July 2019), the company repurchased common stock worth $3.2 million and paid out dividends of $44.7 million. Further, it distributed dividends totaling $11.5 million in the first quarter of fiscal 2020.
It is worth mentioning here that the company announced a 2.4% increase in its annual dividend rate in September 2019. We believe that healthy cash flow position will help Brady in rewarding shareholders going forward.
Investments: Brady is focused on capacity expansion, and is also engaged in research and development activities for driving organic sales. In the fiscal first quarter, the company invested $7.7 million for purchasing property, plant and equipment. This amount reflected an increase of 28.5% over the year-ago quarter. Also, research and development expenses totaled $11 million in the quarter.
For fiscal 2020, the company anticipates capital expenditure of $35 million.
Share Price Performance & Earnings Estimates: We believe that impressive financial results helped drive sentiments for the stock. Notably, the company’s shares gained 4.5% since the release of results on Nov 21, 2019, while the industry declined 0.2%.
Also, Brady’s earnings estimates have been revised positively in the past 60 days. Currently, the Zacks Consensus Estimate for its earnings is pegged at $2.65 for fiscal 2020, reflecting growth of 3.5% from the 60-day-ago figure. On a year-over-year basis, earnings estimates for fiscal 2020 indicate growth of 7.7%.
Brady Corporation Price and Consensus
Brady Corporation price-consensus-chart | Brady Corporation Quote
Other Key Picks
Some other top-ranked stocks in the sector are Kaman Corporation KAMN, DXP Enterprises, Inc DXPE and Standex International Corporation SXI. While Kaman currently sports a Zacks Rank #1 (Strong Buy), DXP Enterprises and Standex carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for DXP Enterprises have improved for the current year, while the same has been unchanged for Kaman and Standex. Further, positive earnings surprise for the last reported quarter was 17.95% for Kaman, 16.39% for DXP Enterprises and 2.11% for Standex.
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