Brady downgraded to neutral, reports earnings increase

Robert W. Baird & Co. Inc. analysts have downgraded Milwaukee-based Brady Corp. to neutral and lowered its price target to $31.
A Baird report attributed the downgrade to weaker organic growth caused by a declining Purchasing Managers Index in the UK and electronics manufacturing setbacks for Brady customers due to flooding in Thailand.
“We estimate that Brady generates roughly $50 million in annual revenue from Thailand, primarily as a supplier of die-cut components to the (hard disk drive) industry,” the report said.
Mergers and acquisitions activity has also been slow at Brady as valuations climb, though M&A is a core growth strategy for the company.
Baird analysts reduced Brady earnings per share estimates by $0.15 to $2.25 for fiscal 2012 and by $0.10 to $2.60 for FY13.
But Brady beat those predictions, recently reporting fiscal first quarter net income of $32.7 million, or 62 cents per share, up from $26.3 million, or 50 cents per share, in the same quarter last year.
Excluding after-tax restructuring charges of $2.6 million in the first quarter of fiscal 2011, net income was up 13.2 percent.
Brady Corp.’s sales for the quarter were up 6.0 percent to $349.5 million from $329.6 million a year earlier.
"I am pleased with our net income growth and our organic sales growth in the first quarter. This profitability improvement is a direct result of our on-going initiatives to streamline our processes and improve our profitability through various activities including those stemming from the Brady Business Performance Systems (BBPS)," said Frank Jaehnert, Brady’s president and chief executive officer. "We also remain focused on improving our customer service and our customers’ buying experiences and investing in growth initiatives, especially our investments in developing proprietary new products that add customer value."