A month has gone by since the last earnings report for Acuity Brands (AYI). Shares have lost about 6.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Acuity Brands due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Acuity Brands’ (AYI) Q3 Earnings & Revenues Beat Estimates
Acuity Brands, Inc. reported fourth-quarter fiscal 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Earnings beat estimates for the second straight quarter, whereas revenues beat the same for third consecutive quarter. However, the metrics declined year over year due to the coronavirus pandemic.
Also, the company pointed out that it expects weakness in non-residential building activity stemming from the pandemic.
Neil Ashe, president and chief executive officer of Acuity Brands, said, “Our company achieved strong financial results in the fourth quarter despite the backdrop of a weak market environment associated with the COVID-19 pandemic which continues to negatively impact our end markets.”
The company reported adjusted earnings of $2.35 per share that comfortably surpassed the Zacks Consensus Estimate of $1.96 by 19.9%. However, the said metric declined 14.5% from the year-ago reported figure.
Net sales for the quarter totaled $891.2 million, which topped the consensus mark of $815 million. However, the reported figure declined 5% from $938.1 million in the prior-year quarter. The downside was caused by nearly 4% decline in volume, mainly due to lower demand owing to the COVID-19 pandemic, partially offset by 3% contribution from acquisitions. Sales were also impacted by 4% net unfavorable change in product prices and mix of products sold.
Gross margin came in at 42.1%, flat year over year. Lower costs for certain inputs and contributions from acquisitions were overshadowed by unfavorable price mix as well as decline in volume.
Adjusted selling, distribution and administrative or SD&A expenses came in at $244 million (27.4% of net sales) compared with $249 million (26.5% of net sales) in the prior-year quarter. The increase was due to higher acquisition-related costs. Adjusted operating profit margin came in at 14.7%, down 90 bps year over year.
As of Aug 31, 2020, Acuity Brands had cash and cash equivalents of $560.7 million compared with $461 million at fiscal 2019-end. In fiscal 2020, cash provided by operating activities totaled $504.8 million, reflecting an increase from $494.7 million in fiscal 2019.
The company stated that it expects weakness in non-residential building activity as the uncertainties related to the economic recovery persist. The company further stated that it plans to strengthen its product portfolio in lighting, lighting controls and intelligent buildings. It will also invest in digital transformation to increase market share.
Fiscal 2020 Review
In fiscal 2020, the company generated adjusted earnings of $8.27 per share, down 13.6% from $9.57 in the year-ago period. Revenues of $3.3 billion declined 9.4% from the year-ago period due to 12% decline in volumes.
Adjusted operating margin declined 70 bps to 13.7%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 6.79% due to these changes.
At this time, Acuity Brands has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Acuity Brands has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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