Wells Fargo Stays Neutral On Brady: 'Expect Some Level Of Choppiness In The Near-Term'

Brady Corp BRC is making progress in strengthening its core growth profile, while the workplace safety business appears to be a work in progress, according to Wells Fargo.

The Analyst

Allison Poliniak-Cusic maintained a Market Perform rating on Brady Corp. with an unchanged $45 price target.

The Thesis

While Brady Corp.’s share price has appreciated by 13.7% year-to-date, backed by the progress made by the company in generating growth and improving its cost structure, near-term catalysts are limited, Poliniak-Cusic said in a Thursday note. (See her track record here.) 

The analyst presented key takeaways from meetings with Brady CEO Michael Nauman, CFO Aaron Pearce and CAO corporate controller Ann Thornton.

The company intends to continue increasing R&D investment to drive above-market organic growth, the analyst said. 

Brady has been actively adding more specialized sales staff to increase engagement and sales at the customer levels, Poliniak-Cusic said. The company is taking the right initiatives, although macro challenges could pressure growth in the near term, she said. 

Wells Fargo has concerns about the longer-term growth and profitability of Brady's workplace safety business, Poliniak-Cusic said. 

"We believe that management is taking the right steps in WPS to position the business to more effectively compete for the long-term, but expect some level of choppiness in the near-term.”

Price Action

Brady Corp. shares were up 1.94% at $50.39 at the time of publication Friday. 

Related Links:

Brady's Q3 Earnings Preview

Earnings Scheduled For May 23, 2019