Brady’s Digital Identity Pivot: Data Centers and the Honeywell PSS Deal

A record quarter meets a transformative acquisition as Brady doubles its addressable market.

BRC · Earnings Call · 2026-05-18

The Quarter: A Record of Acceleration

Brady Corporation delivered a headline-grabbing fiscal Q3, with adjusted EPS of $1.50, up 23% year-over-year, on organic sales growth of 8.2%. “We reported a new record high adjusted earnings per share of $1.5, an increase of 23% versus the third quarter of last year.” — Russell R. Shaller, President and CEO · 2026-05-18 The strength was broad: both regions grew, and gross margin hit 51.8%—a 50 basis point improvement. Data center demand remains the key growth engine. Russell Shaller noted that “Data centers are making a meaningful impact in our growth in this product category this year.” — Russell R. Shaller, President and CEO · 2026-05-18 In the Americas & Asia region, Wire ID—now 20% of revenue—grew 19% in the quarter. This is not a one-quarter fluke. In the September 2025 call, Shaller had already flagged the opportunity: “the biggest one is you can see from our wire markers, which data centers is a significant part of the wire marker business. Data centers have been doing, no surprise to anybody, phenomenal.” — Russell Schaller, Chief Executive Officer (CEO) · 2025-09-04 The company’s new I4311 portable printer, launched in February, is also selling well above expectations—“Launched in February, our I4.31 thousand is a 4-inch portable printer, which is tailored for plant safety and manufacturing professionals. it is selling well above expectations.” — Russell R. Shaller, President and CEO · 2026-05-18

The PSS Acquisition: Digital Identity and Printing

The quarter’s real news, though, was the agreement to acquire Honeywell's Productivity Solutions and Services (PSS) business. The deal nearly doubles Brady’s addressable market and adds a third pillar—enterprise workforce productivity—to its portfolio.

We see PSS as a unique opportunity to expand our... into leading-edge mobility, and scanning solutions.
Russell R. Shaller, President and CEO · 2026-05-18

The PSS business brings a complementary portfolio of scanning and mobility devices, and Brady expects to leverage its productivity solutions to create a single-source offering. Financially, Brady will take on $1.3 billion of debt to fund the deal (a $500 million term loan and $800 million of private placement debt), with net leverage of about 2.5x at closing. Management expects $0.80 of adjusted EPS accretion in year one, before synergies. This pushed full-year adjusted EPS guidance up to $5.20–$5.30, implying 13–15% growth. Not everyone was enthusiastic. Two board members resigned after the deal announcement, prompting a 10% stock drop. On the call, Shaller explained the resignations were due to the increased time commitment demanded by the transaction: “some of our board members simply said, I cannot commit to that level of engagement.” — Russell R. Shaller, President and CEO · 2026-05-18 He emphasized there was no dissent on the deal itself.

Financial Strength and the Debt Transition

Brady’s quarterly revenue reached $435 million in Q3 2026, up 14% year-on-year, after a period of mid-single-digit growth. The company had been in a net cash position of $149 million as of the quarter end—a position that will be replaced by debt as the PSS acquisition closes (expected August 1). Management remains committed to the dividend, which has been increased for 40 consecutive years. The strong cash generation—operating cash flow up 35% year-to-date—supports the deleveraging plan. Shaller and CFO Ann Thornton expect to be below 2x net leverage within two years.

Riding the Global Data-Center Wave

Brady’s data-center exposure dovetails with a broader market theme. Across the global keyword trajectory, "data center" and related terms have featured prominently in recent earnings calls, and the price tape shows data-center-linked names outperforming. Brady is levered to this through its wire and identification products, which are used throughout data-center construction and retrofits. However, the company remains cautious. Shaller noted that data-center building is at "a virtual capacity limit," but that this likely ensures a multi-year tailwind rather than a sugar high. The new printer, with its unique 4-inch portable format, adds a differentiated growth vector.

Investor Takeaways

Brady’s fiscal 2026 is shaping up as a breakout year: record EPS, robust organic growth, and a transformative acquisition. The PSS deal shifts the company’s identity from a labels-and-identification specialist toward a broader AIDC (automatic identification and data capture) player. Risks remain—integration, debt, and potential data-center cyclicality—but the immediate momentum and the strategic logic are compelling. With the stock still about 7% below its early-August peak, the market may be waiting for more clarity on the PSS integration. For investors willing to ride the data-center wave and believe in the cross-selling potential, Brady offers a rare combination of organic growth and a transformational deal.