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Acuity Brands (AYI) to Post Q4 Earnings: What's in Store?

Zacks Equity Research

Acuity Brands, Inc. AYI is slated to announce fourth-quarter fiscal 2019 results on Oct 2, before the opening bell.

In the last reported quarter, the company delivered mixed results, wherein earnings beat the Zacks Consensus Estimate by 1.2% but sales missed the same by 2.3%. Notably, its earnings grew 6.8% on a year-over-year basis on the back of improved sales, higher price realization and productivity gains, despite ongoing inflationary cost pressures and the impact of tariffs.

The company delivered positive earnings surprise in each of the trailing five quarters. The trend is expected to continue in the to-be-reported quarter as well.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been downwardly revised by 1.4% over the past seven days to $2.80. This indicates a 4.5% increase from the year-ago earnings of $2.68 per share. Revenues, however, are expected to decline 3.1% year over year to $1.03 billion.

 

Acuity Brands Inc Price and EPS Surprise

 

Acuity Brands Inc Price and EPS Surprise

Acuity Brands Inc price-eps-surprise | Acuity Brands Inc Quote

Factors at Play

Acuity Brands is poised to benefit from the diversified portfolio of innovative lighting control solutions and energy-efficient luminaries. Again, strategic buyouts and joint ventures for expansion of its geographic borders and product portfolio are expected to aid the top line.

Acuity Brands has been undertaking various cost-reduction initiatives like price increase. These initiatives are likely to benefit its bottom line in the to-be-reported quarter. The company believes that fiscal fourth-quarter adjusted operating profit margin will exceed from the prior-year level and improve on a sequential basis.

On the contrary, the lighting industry has witnessing weak demand for luminaries over the last few quarters in the United States and this is expected to impact the upcoming quarterly results as welll. Particularly for larger non-residential lighting projects, the company has been witnessing weak demand, which is expected to result in tepid top-line growth in the to-be-reported quarter. Distributors have been reporting lower-than-expected sales growth, thanks to weather, labor shortages and slow activity of large projects. This is also likely to hamper the quarter to be reported.

The company expects fiscal fourth-quarter net sales to be down modestly from the year-ago period. Also, its efforts to boost margin profile may hamper top-line growth.

Additionally, higher input cost of electronic and certain oil-based components, along with freight and commodity-related items — particularly steel prices — are likely to put pressure on the company’s overall results in the to-be-reported quarter.

What Our Model Indicates

Our proven model suggests that Acuity Brands is likely to beat estimates in the to-be-reported quarter. This is because a stock needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for increasing the odds of an earnings beat.

Earnings ESP: The company’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +2.09%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Acuity Brands carries a Zacks Rank #3, which further increases the predictive power of ESP.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks to Consider

Here are some other companies in the construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarterly reports:

Jacobs Engineering Group Inc. JEC has an Earnings ESP of +2.93% and carries a Zacks Rank #2.

Toll Brothers, Inc. TOL has an Earnings ESP of +1.65% and holds a Zacks Rank #3.

M.D.C. Holdings, Inc. MDC has an Earnings ESP of +8.95% and carries a Zacks Rank #1.

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Acuity Brands Inc (AYI) : Free Stock Analysis Report
 
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