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What to Expect From Acuity Brands' (AYI) Earnings in Q1

Zacks Equity Research

Acuity Brands, Inc. AYI is slated to announce first-quarter fiscal 2019 results on Jan 9, before the opening bell.

The company delivered a positive earnings surprise of 1.9% in the last reported quarter. However, the company reported negative earnings surprise in two of the trailing four quarters, with average miss of 1.86%.

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. The Zacks Consensus Estimate for the quarter to be reported is currently pegged at $2.16, trending downward over the past seven days. Nonetheless, this reflects an increase of 11.3% from the year-ago earnings of $1.94 per share. Revenues are expected to be $931.7 million, up 10.6% year over year.

Acuity Brands Inc Price and EPS Surprise

Acuity Brands Inc Price and EPS Surprise | Acuity Brands Inc Quote

Let’s See How Things are Shaping Up for This Announcement.

Acuity Brands is poised to benefit from its diversified portfolio of innovative lighting control solutions and energy-efficient luminaries. In fiscal 2018, Acuity Brands introduced almost 100 new product families to its industry-leading portfolio, thereby gaining market share in product categories and sales channels. Sales volume in the fourth quarter of fiscal 2018 grew approximately 13% year over year, backed by continued efforts to expand customer base, along with the introduction of new products and solutions.

Notably, Acuity Brands is expanding its geographic borders and product portfolio through acquisitions and joint ventures. In fiscal 2018, the company spent $163 million on acquisitions, namely Lucid Design Group and IOTA Engineering. Its buyout of IOTA, the industry leader in emergency lighting and power equipment for commercial and institutional applications, will enhance market leadership in this lighting category. During the fourth quarter of fiscal 2018, it offloaded the Spanish lighting business, Carandini, in view of the challenging lighting market.

In the fourth quarter of fiscal 2018, shipments of lighting fixtures in the United States were flat to slightly down from the year-ago period. In fact, the company remains cautiously optimistic for fiscal 2019. Per third-party forecasts and leading indicators, the North American lighting market is likely to increase in low-single digits in fiscal 2019.

Acuity Brands has been facing issues that led to lower gross margins. In fact, its adjusted gross profit margin in the last reported quarter declined 350 basis points (bps) from the prior-year period. This was primarily due to unfavorable price mix as well as higher input costs for certain items, particularly steel and oil-based components. Particularly, price mix reduced its adjusted gross profit margin by 280 bps in the quarter. This trend is likely to continue in the to-be-reported quarter as well. Nonetheless, Acuity Brands expects that a number of actions undertaken by the company during the past several months will overshadow inflationary cost pressures and improve productivity in the first quarter of fiscal 2019.

What Our Model Indicates

Acuity Brands does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — to increase 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 +3.86%. 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 #4 (Sell), which decreases the predictive power of ESP.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) 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 (Strong Buy) stocks here.

Stocks to Consider

Here are some 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:

D.R. Horton, Inc. DHI has an Earnings ESP of +3.61% and carries a Zacks Rank #3. The company is slated to report quarterly numbers on Jan 25, 2019.

Owens Corning Inc. OC has an Earnings ESP of +3.13% and holds a Zacks Rank #2. The company is expected to report quarterly numbers on Feb 20, 2019.

MasTec, Inc. MTZ has an Earnings ESP of +0.47% and carries a Zacks Rank #3. The company is likely to report quarterly numbers on Feb 26, 2019.

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