Wells Fargo Downgrades Brady Corp. (BRC) to Underweight

January 14, 2020 6:50 AM EST
Get Alerts BRC Hot Sheet
Price: $54.23 +2.81%

Rating Summary:
    3 Buy, 3 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 18 | Down: 12 | New: 23
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Wells Fargo analyst Allison Poliniak-Cusic downgraded Brady Corp. (NYSE: BRC) from Equal Weight to Underweight with a price target of $50.00.

The analyst comments "We rate the shares of BRC Underweight. Our thesis reflects the limited upside potential in valuation and/ earnings outgrowth relative to our Diversified Industrial coverage. With shares up 32% in 2019 and 51% on a two-year stack, relative to the SPX up 29% and 21% respectively, we believe investors have largely recognized the progress BRC has made returning to growth and improving margins through a leaner fixed cost structure. We would look to become more constructive on the name if we see greater and more consistent progress across its portfolio in its efforts to accelerate organic growth above GDP/market levels. BRC has been consistent in its message about increasing investment in R&D as a means to drive above market organic growth. BRC current estimates assume 1.5-2.5% core growth for FY20 following 2019’s 2.8%. We believe BRC is still in the early stages of building a more consistent, innovative product flow to drive sales, spending roughly 4% of sales in R&D to build and strengthen its new product channel. We have been consistent with our concerns regarding the growth and profitability of the WPS business longer-term and disintermediation from various e-commerce channels. While CEO Michael Nauman has highlighted challenges in North America, they have righted the ship in Europe and Australia; however, roughly half of WPS sales are re-distributed vs. value-add manufactured."

For an analyst ratings summary and ratings history on Brady Corp. click here. For more ratings news on Brady Corp. click here.

Shares of Brady Corp. closed at $57.89 yesterday.



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