""new company record high earnings per share this quarter"" - Russell Shaller
Brady Corporation (BRC) QQ3 2024 Earnings Analysis: Organic Growth Strength, Margin Expansion, and Strategic Initiatives (Gravotech, AI) Drive Record EPS
Executive Summary
Brady Corporation delivered a solid QQ3 2024 performance characterized by sustainable top-line growth, expanding margins, and strong cash generation. Organic sales rose 4.5% driven by both Americas/Asia (4.5%) and Europe/Australia (4.4%), underscoring Brady’s ability to capture wallet share across regions despite a sluggish macro environment. Total revenue grew 1.9% for the quarter after accounting for divestitures (-2.3%) and foreign currency headwinds (-0.3%), reflecting a disciplined portfolio management stance. The quarter produced a company-record GAAP EPS of $1.05 and Non-GAAP EPS of $1.09, up 9.4% and 14.7% year over year, respectively, supported by an improved gross margin of 51.6% (up 130 basis points YoY). Management highlighted ongoing investments in R&D, sales capacity, and a prudent capital allocation framework that includes dividends, opportunistic buybacks, and selective M&A. Brady also announced the launch of three new products this quarter and signalled the Gravotech acquisition as a strategic fit to broaden the company’s identification ecosystem, including direct part marking capabilities. Looking ahead, Brady raised its fiscal 2024 EPS guidance to a GAAP range of $3.93-$4.00 and a non-GAAP range of $4.08-$4.15, while maintaining a low single-digit organic sales growth outlook. Management cautioned that the trajectory remains sensitive to USD strength, inflation, and macro activity, but reiterated a commitment to deploying capital to drive long-term shareholder value.
Key Performance Indicators
Revenue
343.38M
QoQ: 6.43% | YoY:1.86%
Gross Profit
176.85M
51.50% margin
QoQ: 9.11% | YoY:4.22%
Operating Income
63.37M
QoQ: 17.51% | YoY:0.59%
Net Income
50.89M
QoQ: 16.65% | YoY:5.91%
EPS
1.06
QoQ: 17.78% | YoY:9.28%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $343,384 (YoY growth 1.86%; QoQ growth 6.43%), gross profit $176,854 (YoY +4.22%; QoQ +9.11%), gross margin 51.50% (vs. prior year 50.30%), operating income $63,370 (YoY +0.59%; QoQ +17.51%), EBITDA $72,537 (YoY not disclosed in quarterly context). Net income $50,890 (YoY +5.91%; QoQ +16.65%), EPS (GAAP) $1.05, EPS (Diluted) $1.05; Non-GAAP EPS $1.09 (YoY +14.7%).
Organic growth drivers: Americas/Asia +4.5%, Europe/Australia +4.4%; total organic growth across regions supported by higher-margin product mix.
Margin and efficiency: Gross margin expanded to 51.6% (up 130 bps YoY); SG&A $95.8M, ~27.2% of sales (down from 27.4% of sales pro forma); R&D $17.7M (5.1% of sales).
Cash generation and capex: Operating cash flow $72.7M; Free cash flow $64.4M; Capex $8.3M; Net cash position $96.7M at period-end; fully funded dividends and stock buybacks; Brady repurchased 863,000 shares for $50.4M.
Outlook and guidance: Fiscal 2024 GAAP EPS guidance raised to $3.93-$4.00 and non-GAAP to $4.08-$4.15; expects low single-digit organic growth in the full year; tax rate ~21%; D&A $30-$32M; capex ~$75M (including the planned consolidation/build-out initiatives).
Financial Highlights
Key quarterly metrics and directional changes (USD 000s unless noted):
- Revenue: $343,384 (YoY growth 1.86%; QoQ growth 6.43%), gross profit $176,854 (YoY +4.22%; QoQ +9.11%), gross margin 51.50% (vs. prior year 50.30%), operating income $63,370 (YoY +0.59%; QoQ +17.51%), EBITDA $72,537 (YoY not disclosed in quarterly context). Net income $50,890 (YoY +5.91%; QoQ +16.65%), EPS (GAAP) $1.05, EPS (Diluted) $1.05; Non-GAAP EPS $1.09 (YoY +14.7%).
- Organic growth drivers: Americas/Asia +4.5%, Europe/Australia +4.4%; total organic growth across regions supported by higher-margin product mix.
- Margin and efficiency: Gross margin expanded to 51.6% (up 130 bps YoY); SG&A $95.8M, ~27.2% of sales (down from 27.4% of sales pro forma); R&D $17.7M (5.1% of sales).
- Cash generation and capex: Operating cash flow $72.7M; Free cash flow $64.4M; Capex $8.3M; Net cash position $96.7M at period-end; fully funded dividends and stock buybacks; Brady repurchased 863,000 shares for $50.4M.
- Outlook and guidance: Fiscal 2024 GAAP EPS guidance raised to $3.93-$4.00 and non-GAAP to $4.08-$4.15; expects low single-digit organic growth in the full year; tax rate ~21%; D&A $30-$32M; capex ~$75M (including the planned consolidation/build-out initiatives).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
343.38M
1.86%
6.43%
Gross Profit
176.85M
4.22%
9.11%
Operating Income
63.37M
0.59%
17.51%
Net Income
50.89M
5.91%
16.65%
EPS
1.06
9.28%
17.78%
Key Financial Ratios
currentRatio
2.06
grossProfitMargin
51.5%
operatingProfitMargin
18.5%
netProfitMargin
14.8%
returnOnAssets
3.57%
returnOnEquity
4.98%
debtEquityRatio
0.09
operatingCashFlowPerShare
$1.52
freeCashFlowPerShare
$1.34
dividendPayoutRatio
22%
priceToBookRatio
2.77
priceEarningsRatio
13.91
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management quotes and themes from the QQ3 2024 earnings call:
- Strategy and product development: "new company record high earnings per share this quarter"; "launched a rugged barcode scanner" and "a new industrial jet color label printer"; "ToughStripe Max" floor marking tape; AI potential to increase productivity: "the potential degenerative AI has to positively impact our customers and the broader economy is substantial."
- Regional performance and growth: "organic sales growth of 4.5%" across Americas/Asia and Europe/Australia; Americas/Asia growth 4.5%, Europe/Australia 4.4%; China down just over 17%, offset by strength elsewhere; "well above GDP in most end markets and geographies".
- Margin and cost structure: "gross margin to 51.6%" (YoY improvement) supported by higher-margin product mix and stabilizing input costs; SG&A as a percentage of sales at 27.2% (ex- amortization/gain adjustments); R&D spend up to 5.1% of sales.
- Capital allocation and shareholder value: "repurchased 863,000 shares for $50.4 million"; emphasis on dividends and opportunistic buybacks; 38th consecutive annual dividend increase.
- Strategic positioning and M&A: Gravotech acquisition remains regulatory in process; Gravotech thesis centers on direct part marking to complement Brady’s labeling ecosystem; mixed channel strategy with greater use of value-added resellers for track-and-trace products.
- Guidance and risks: reaffirmed guidance with modest organic growth; potential risks include USD strength, inflation, and slower economic activity; management notes the macro environment can introduce variability but commits to disciplined capital deployment.
"new company record high earnings per share this quarter"
— Russell Shaller
"repurchased 863,000 shares for $50.4 million"
— Ann Thornton
Forward Guidance
Brady reaffirmed fiscal 2024 guidance, increasing the GAAP EPS range to $3.93-$4.00 and the non-GAAP range to $4.08-$4.15, with expected low single-digit organic sales growth for the full year. The company also guided to depreciation & amortization of $30-$32M and capital expenditures around $75M, including approximately $55M for a leased facility purchase and consolidation. Tax rate is projected near 21%. Risks acknowledged include a potential stronger USD, persistent inflation, and a slower-than-expected economic recovery. Our assessment: the guidance appears achievable given 4.5% Q3 organic growth trajectory, continued margin resilience, and substantial cash generation. The Gravotech opportunity adds optionality to revenue mix via direct part marking and expanded ecosystem capabilities, potentially boosting long-term organic growth and cross-sell opportunities. Key monitoring points for investors: (1) regional demand trends, especially in Europe where growth outpaced GDP, (2) the progression and integration of Gravotech, (3) the trajectory of margins as input costs stabilize and pricing/push-through effects evolve, (4) currency movements and inflation dynamics, (5) the cadence of buybacks and dividend sustainability.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
BRC Focus
51.50%
18.50%
4.98%
13.91%
ALLE
44.70%
22.20%
11.10%
18.22%
MSA
47.90%
21.10%
6.08%
26.18%
REZI
28.70%
6.89%
0.60%
36.81%
NL
28.10%
6.05%
9.33%
2.52%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Base-case thesis for Brady stock rests on steady-margin expansion, ongoing 4–5% organic growth, and attractive free cash flow conversion supporting a sustainable dividend and buyback program. The Gravotech initiative offers optionality to complete Brady’s identification ecosystem with direct part marking, potentially unlocking higher-margin, differentiated solutions for manufacturing customers. The company’s balance sheet and cash generation position it well to weather macro uncertainty while continuing to invest in R&D and select acquisitions. Key catalysts include: (1) contribution from new products to incremental revenue in 2025, (2) progress and eventual closing of Gravotech, (3) sustained regional momentum outside China, and (4) disciplined capital management that could raise dividend growth visibility. Risks include currency volatility, potential normalization of margins if input costs stabilize at different levels, and a slower-than-expected macro recovery in manufacturing capex.
Key Investment Factors
Growth Potential
Material growth potential from a diversified identification portfolio, ongoing product innovations (V4500 scanner, J7300 color printer, ToughStripe Max), and expansion into direct part marking via Gravotech. Organic growth run-rate mid-to-high single digits could be supported by wallet-share gains in Europe and continued strength in core identification/Safety Solutions.
Profitability Risk
Macro sensitivity (industrial capex cycles), currency headwinds (USD strength), divestiture-related volatility to reported growth, competitive landscape in identification and safety markets, and regulatory timing on Gravotech. Healthcare drag remains a structural headwind in some end-markets.
Financial Position
Balanced balance sheet with robust cash flow and modest leverage. Net debt is negative (-$68.9M), cash and equivalents stand at ~$160.5M, and total liquidity supports ongoing R&D, capex, dividends, and buybacks. Payouts are well-supported by free cash flow; the company maintains a disciplined approach to capital allocation.
SWOT Analysis
Strengths
Diversified identification and safety product portfolio with broad end-market exposure
Industry-leading gross margin expansion to ~51.6% and improving operating leverage