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BC

BRADY CORP (BRC)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered 7.5% revenue growth to $405.3M, gross margin expanded 120 bps YoY to 51.5%, and adjusted diluted EPS rose 8.0% to $1.21; Brady raised the low end of FY26 adjusted EPS guidance to $4.90-$5.15 .
  • Americas & Asia drove organic growth (+4.7%) with strong wire ID demand (nearly +19%) and Asia +11.9% organic; Europe & Australia improved profitability sharply (+370 bps margin) despite a small organic sales decline .
  • Wall Street consensus was modestly below actuals: Q1 FY26 revenue $405.3M vs $395.0M consensus*, adjusted EPS $1.21 vs $1.19 consensus*; a clean beat supports guidance confidence (S&P Global) .
  • Management cited price/mix optimization and supply-chain actions behind margin strength; tariff headwind now tracking to low end (~$8M) and cost-out benefits mostly realized (~80%), supporting earnings durability .
  • Near-term catalysts: connected-product initiatives (BradyScan), engineered product mix, continued R&D investment, and raised guidance floor; watch tariff trajectory and Europe macro for demand stabilization .

What Went Well and What Went Wrong

  • What Went Well

    • “We generated adjusted EPS of $1.21…driven by organic sales growth and continued gross profit margin expansion” — CFO Ann Thornton .
    • Americas & Asia organic sales +4.7%; wire identification up nearly 19% with data centers as a key end market — CEO Russell R. Shaller .
    • Europe & Australia segment margin up 370 bps to 13.7% on cost reductions; segment profit +42.8% YoY .

  • What Went Wrong

    • Europe & Australia organic sales declined 0.8% with softer people ID and safety/facility ID demand; macro remains challenging .
    • Inventory elevated due to acquisitions, strategic stocking of high-running products, and product line shifts to Asia; normalization expected to be gradual .
    • Tariffs remain a headwind (projected ~$8M for FY26), requiring ongoing mitigation via pricing and global sourcing .

Financial Results

MetricQ3 FY25Q4 FY25Q1 FY26
Revenue ($USD Millions)$382.6 $397.3 $405.3
Gross Profit Margin %51.0% 50.4% 51.5%
Operating Income ($USD Millions)$67.2 $59.3 $68.0
Net Income ($USD Millions)$52.3 $49.9 $53.9
Diluted EPS (GAAP) ($)$1.09 $1.04 $1.13
Adjusted Diluted EPS ($)$1.22 $1.26 $1.21

Segment performance

SegmentQ3 FY25 Net Sales ($M)Q3 FY25 Segment Profit ($M)Q4 FY25 Net Sales ($M)Q4 FY25 Segment Profit ($M)Q1 FY26 Net Sales ($M)Q1 FY26 Segment Profit ($M)
Americas & Asia$253.7 $57.2 $260.8 $51.6 $268.9 $59.9
Europe & Australia$128.9 $17.5 $136.5 $15.1 $136.4 $18.7

KPIs and cash flow

KPIQ3 FY25Q4 FY25Q1 FY26
Cash Flow from Operating Activities ($M)$59.9 $58.3 $33.4
Free Cash Flow ($M)$55.6 $49.4 $22.4
Net Cash Position ($M)$49.3 $75.0 $66.8
R&D Expense ($M)$18.9 $23.1 $23.3
SG&A ($M)$109.0 $118.0 $117.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Diluted EPS ($)FY26$4.85–$5.15 $4.90–$5.15 Raised low end
GAAP Diluted EPS ($)FY26$4.55–$4.85 $4.57–$4.82 Low end +$0.02; high end -$0.03 (amortization update)
Income Tax RateFY26~21% ~21% Maintained
Depreciation & Amortization ($M)FY26~$42 ~$44 Raised
Capital Expenditures ($M)FY26~$40 ~$40 Maintained
Organic Sales GrowthFY26Low-single digit Low-single digit Maintained
DividendsFY25→FY26Annual dividend increased to $0.98; 40th consecutive year Continued returns via dividends and buybacks Ongoing policy

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25, Q4 FY25)Current Period (Q1 FY26)Trend
Engineered product mix and marginsGross margin 51.0%; reorg costs impacted margins ; Q4 GM 50.4%, reorg costs ~50 bps GM 51.5%; strength from price/mix and supply chain actions Improving margins; mix shift supportive
Tariffs/macroTariff environment uncertain; mitigation via global manufacturing Tariff headwind tracking to low end (~$8M) for FY26 Headwind moderating
R&D and connected productsR&D $18.9M/Q3 (5.0%) ; $23.1M/Q4 (5.8%) R&D $23.3M (5.7%); BradyScan app launched to integrate readers/printers/lasers Elevated R&D; product ecosystem build-out
Wire ID/product performanceAmericas & Asia organic +5.4%; Asia +22.9% in Q3 Wire ID nearly +19% YoY; data centers as key end market Sustained strength in wire ID
Europe & AustraliaOrganic declines persisted; margin pressure Segment margin +370 bps; profit +42.8% YoY Profit recovery; demand remains soft
Inventory/supply chainStrategic stocking and printer production shifts Elevated inventory due to acquisitions/stocking/Asia shifts; expected normalization Inventory higher but managed

Management Commentary

  • CEO Russell R. Shaller: “We reported strong organic sales growth in the Americas & Asia… and our Europe & Australia region reported a significant improvement in segment profit… We also closed on the acquisition of Mecco… an exciting addition to our laser marking system product line” .
  • CFO Ann Thornton: “We generated adjusted EPS of $1.21… driven by our organic sales growth and continued gross profit margin expansion… We are in a net cash position of $66.8 million… allowing strategic investments while returning funds through dividends and share buybacks” .
  • CEO on connected products: “BradyScan… consolidates the entire scanning workflow… communicates seamlessly with our printers… geotagged scans… integrate lasers, readers, and printers into a single platform” .

Q&A Highlights

  • Gross margin drivers: mix/pricing and supply-chain optimization; tariff headwind guided to low end (~$8M) supporting raised EPS guidance floor .
  • R&D run-rate: ~5.5% of sales expected near-term; acquisitions elevate R&D; streamlining potential at the margin .
  • Cost-out benefits: ~80% realized; no additional restructuring anticipated; ongoing efficiency focus .
  • Cash conversion: management targets improvement toward ~100% over FY26; Q1 seasonally lowest due to timing .
  • Inventory: elevated from acquisitions, strategic stocking of high-running items, and production shifts to Asia; normalization expected without large increases .
  • Europe & Australia outlook: low-single-digit organic growth targeted in FY26; macro still subdued, recovery likely 1–2 quarters out .

Estimates Context

MetricQ3 FY25 Consensus*Q3 FY25 ActualQ4 FY25 Consensus*Q4 FY25 ActualQ1 FY26 Consensus*Q1 FY26 Actual
Revenue ($USD Millions)386.6*382.6 386.9*397.3 395.0*405.3
Primary EPS (Adjusted) ($)1.215*1.22 1.235*1.26 1.19*1.21
EBITDA ($USD Millions)82.0*81.3*76.6*81.96*80.1*78.98*
  • Q1 FY26: revenue beat by ~$10.3M and adjusted EPS beat by $0.02; sustained outperformance versus consensus supports guidance confidence (S&P Global). Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Engineered product mix and pricing/supply-chain actions are expanding margins (GM 51.5%); sustainability supported by tariff headwind moving to low end and cost-out benefits largely in place .
  • Raised FY26 adjusted EPS guidance floor to $4.90 underscores confidence; watch D&A step-up ($44M) and FX assumptions .
  • Americas & Asia execution strong; wire ID exposure to data centers provides secular tailwind; Asia organic +11.9% .
  • Europe & Australia profitability improved materially (+370 bps margin), but demand remains fragile; upside if macro stabilizes .
  • Elevated R&D (~5.7% of sales) and connected-product initiatives (BradyScan) can drive higher-margin engineered sales and ecosystem lock-in .
  • Strong balance sheet (net cash $66.8M) enables continued M&A, product investments, and returns (dividends/buybacks) .
  • Short-term: raised guidance and margin beats are positive catalysts; monitor tariff developments and inventory normalization. Medium-term: mix shift toward engineered solutions, integration of MECCO/Gravotech, and digital platform strategy underpin EPS growth .

S&P Global estimates disclaimer: Values marked with * in the Estimates Context section were retrieved from S&P Global.