Brady Stock Slides After Mixed Q1 Results; Notes Margin Challenges As Temporary

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  • Brady Corp BRC reported first-quarter FY22 sales growth of 16% year-over-year to $321.48 million, beating the consensus of $313.79 million. Organic sales increased 7%.
  • Sales by segments: ID Solutions $248.62 million (+25.4% Y/Y) and Workplace Safety $72.86 million (-7.8% Y/Y).
  • Adjusted EPS improved to $0.72 from $0.66 in 1Q21, missing the consensus of $0.75.
  • The gross margin contracted by 64 bps to 48.2%. The operating income increased by 5.1% Y/Y to $44.34 million, and the margin contracted by 143 bps to 13.8%.
  • "We believe that these gross margin challenges are temporary and once our pricing and efficiency initiatives catch up to the cost inflation, our strong sales growth and improved gross profit margins will drive significant bottom-line growth," said CEO Michael Nauman.
  • Brady generated cash from operating activities of $27.49 million, compared to $62.84 million a year ago.
  • FY22 Outlook: Brady's outlook for EPS excluding after-tax amortization expense remains unchanged at $3.12 - $3.32 versus the consensus of $3.17. Brady expects sales growth over 12% Y/Y.
  • Price Action: BRC shares traded lower by 5.88% to $50.52 on the last check Thursday.
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