Here's Why Investors Should Retain Acuity Brands (AYI) Stock
Acuity Brands, Inc. AYI has been benefitting from product vitality and service in its lighting and space businesses. Also, its focus on product innovation and strategic acquisitions & divestitures bodes well. However, high R&D costs and volatile business environment is a concern.
Shares of AYI have gained 5.1% in the past three months compared with the Zacks industry’s rise of 1.9%.
Let’s discuss the factors substantiating its Zacks Rank #3 (Hold).
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Growth Drivers
Acuity Brands’ diversified portfolio of innovative lighting control solutions and energy-efficient luminaries bode well for the company. AYI is making significant strides in its Lighting and Spaces businesses with a solid strategy. Its focus on innovation through product vitality and increasing service levels for the benefit of customers has delivered strong results.
During the third quarter of fiscal 2023, the company launched Design Select to elevate its services for the specification community. The addition of Design Select is a significant enhancement to the company's service strategy, offering clear categorization of ABL Lighting and Lighting Control products.
The company is focused on its Intelligent Spaces Group (ISG), specializes in providing products and services that enhance the intelligence, safety and sustainability of spaces. ISG products and solutions are marketed under multiple brand names, including but not limited to Atrius and Distech Controls. The company achieved significant milestones in the third quarter fiscal 2023, particularly within Distech and Atrius. Distech's strategic focus on expanding addressable market progressed successfully through geographic expansion. The company's strategy for Atrius centers around establishing a data layer that bridges the gap between edge and cloud, enabling the development of impactful applications for build spaces.
The company is committed to expand its geographic borders and product portfolio through acquisitions and joint ventures. During the third-quarter fiscal 2023, the company’s acquired KE2 Therm, enabling the company to enter the commercial refrigeration control space, expanding Distech's market reach. This development is in line with the current refrigeration industry’s rising demand for CO2 solutions, where digital controls ensure safety, efficiency, reliability and cost savings for customers.
Headwinds
The company operates in a highly competitive industry that is affected by volatility owing to a number of general business and economic factors, such as gross domestic product growth, employment levels, credit availability, energy costs and commodity costs. During third-quarter fiscal 2023, the company reported net sales of $1.0 billion, falling 5.7% from $1.1 billion reported in the prior-year period. The downside was due to declines in sales within ABL segment, consistent with lead-time normalization trends and the impact of the wider macro-environment. The company is going through supply chain challenges and rising cost of some components. Although the incremental cost of the technology is relatively low, real cost of installation of that technology is still growing.
Key Picks
Some top-ranked stocks from the Zacks Construction sector are:
Dycom Industries, Inc. DY sports a Zacks Rank #1 (Strong Buy). DY has a trailing four-quarter earnings surprise of 153.7%, on average. Shares of DY have gained 15.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for DY’s 2024 sales and earnings per share (EPS) indicates a rise of 8.3% and 41%, respectively, from the year-ago period’s levels.
Eagle Materials Inc. EXP sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 6.5%, on average. Shares of EXP have increased 63.7% in the past year.
The Zacks Consensus Estimate for EXP’s 2024 sales and EPS indicates a rise of 2% and 8.3%, respectively, from the year-ago period’s levels.
Martin Marietta Materials, Inc. MLM flaunts a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 31%, on average. Shares of MLM have increased 43.4% in the past year.
The Zacks Consensus Estimate for MLM’s 2023 sales and EPS indicates a rise of 18.4% and 31.7%, respectively, from the year-ago period’s levels.
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Acuity Brands Inc (AYI) : Free Stock Analysis Report
