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Brady (BRC) on Acquisition Spree, Purchases Code for $173M

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Brady Corporation (BRC - Free Report) announced that it acquired Salt Lake City, UT-based The Code Corporation. The transaction value was $173 million. Notably, the buyout is Brady’s third acquisition in the fourth quarter of fiscal 2021 (ending July 2021).

Code is a specialist in manufacturing and providing barcode scanners (both handheld and hands-free) as well as related software. It has a strong presence in the healthcare industry of the United States and expanding footholds in the industrial markets. It employs 100 people.

Inside the Headlines

As noted, Brady intends on settling the acquisition price of $173 million through available cash and funds raised through its revolving credit facility.

The buyout is anticipated to strengthen Brady’s presence in the industrial track-and-trace arena. In the quarters ahead, the buyout along with Brady’s research and development initiatives will help in extending the company’s businesses in the Americas, Asia and Europe.

For fiscal 2022 (ending July 2022), Brady anticipates the Code buyout to generated revenues of $50 million and earnings before interest, tax, depreciation and amortization (EBITDA) of $10 million.

The acquired Code business will be integrated with Brady’s ID Solutions segment. The segment generated revenues of $218.1 million in the third quarter of fiscal 2021 (ended April 2021), representing growth of 12.96% from the year-ago quarter.

Other Buyout Activities

We believe that the above-mentioned transaction is consistent with the company’s policy of acquiring businesses to gain access to new customers, regions and product lines.

In addition to the above-mentioned buyout, Brady acquired the U.K.-based Magicard Limited for $59 million and Finland-based Nordic ID Oyj for $13 million in the fourth quarter of fiscal 2021.

Brady’s Magicard buyout is expected to boost the company’s offerings related to encoding and rigid-card printing. Revenues of $35 million and EBITDA of $4 million are anticipated from this buyout in fiscal 2022. Then again, the Nordic ID acquisition is expected to enhance Brady’s RFID product offerings. Notably, this buyout is expected to generate revenues of $11 million in fiscal 2022, while EBITDA is predicted at the break-even level.

It is worth mentioning here that Brady anticipates Magicard, Nordic ID and Code acquisitions to boost revenues by $11 million in the fourth quarter of fiscal 2021. On earnings, the impact is expected to be minimal from the buyouts.

Zacks Rank, Price Performance and Estimate Trend

Brady currently carries a Zacks Rank #3 (Hold). The company is poised to benefit from its solid product offerings, buyout activities, shareholder-friendly policies and growth investments. However, rising costs of sales and persistent challenges in end markets are concerning.

In the past three months, the company’s shares have increased 1% compared with the industry’s growth of 7.3%.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

The Zacks Consensus Estimate of Brady’s earnings is pegged at $2.65 per share for fiscal 2021 (ending July 2021) and $2.90 for fiscal 2022 (ending July 2022), suggesting growth of 3.1% and 1.8% from the respective 60-day-ago figures.

Brady Corporation Price and Consensus

 

Brady Corporation Price and Consensus

Brady Corporation price-consensus-chart | Brady Corporation Quote

Stocks to Consider

Three better-ranked stocks in the industry are Allegion plc (ALLE - Free Report) , Ituran Location and Control Ltd. (ITRN - Free Report) and Johnson Controls International plc (JCI - Free Report) . All companies presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, earnings estimates for these stocks have improved for the current year. Further, earnings surprise for the last reported quarter was 17.65% for Allegion, 14.29% for Ituran Location and 6.12% for Johnson Controls.

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