Analysts might have been a bit too bullish on Acuity Brands, Inc. (NYSE:AYI), given that the company fell short of expectations when it released its quarterly results last week. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at US$835m, statutory earnings missed forecasts by an incredible 26%, coming in at just US$1.44 per share. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Taking into account the latest results, Acuity Brands's nine analysts currently expect revenues in 2020 to be US$3.55b, approximately in line with the last 12 months. Statutory earnings per share are expected to rise 6.3% to US$8.27. In the lead-up to this report, analysts had been modelling revenues of US$3.70b and earnings per share (EPS) of US$9.03 in 2020. Analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.
Despite the cuts to forecast earnings, there was no real change to the US$137 price target, showing that analysts don't think the changes have a meaningful impact on the stock's intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Acuity Brands, with the most bullish analyst valuing it at US$155 and the most bearish at US$100.00 per share. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Acuity Brands's performance in recent years. We would highlight that sales are expected to reverse, with the forecast 0.6% revenue decline a notable change from historical growth of 8.0% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 3.1% next year. It's pretty clear that Acuity Brands's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Acuity Brands analysts - going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Acuity Brands's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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