Why Is Acuity Brands (AYI) Up 2.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Acuity Brands (AYI). Shares have added about 2.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Acuity Brands due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Acuity Brands Q1 Earnings Beat, Adjusted EBITDA Up Y/Y
Acuity Brands reported impressive results in first-quarter fiscal 2024 (ending Nov 30, 2023), with earnings and revenues surpassing the Zacks Consensus Estimate. Earnings beat the consensus mark for the 15th consecutive quarter.
Despite a year-over-year decline in sales in the lighting business, AYI reported strong fiscal first-quarter performance driven by increased focus on margins and cash generation. This approach resulted in a higher adjusted operating profit margin and increased adjusted diluted earnings per share.
Delving Deeper
AYI reported adjusted earnings of $3.72 per share, which topped the consensus estimate of $3.09 by 20.4%. The metric also increased 13.1% from the year-ago reported figure of $3.29 per share.
Net sales of $934.7 million surpassed the consensus mark of $924.5 million by 1.1%. The metric declined 6.3% from the prior-year quarter’s level. The downside was due to lower volumes.
Segment Details
Acuity Brands Lighting and Lighting Controls or ABL’s net sales declined 7.5% year over year to $876.4 million. Our estimate for the metric was $865.6 million. Net sales in the Independent Sales Network were down 7.2% year over year to $625.2 million. Sales from the Direct Sales Network were down 8.5% from the prior-year period’s level to $97.4 million. Retail sales of $55.6 million increased 11.4% from the prior-year quarter’s levels. Sales in the Corporate Accounts channel declined 15.5% from the prior year’s levels to $41.5 million. The Original equipment manufacturer and other channels generated sales of $56.7 million, down 16.6% from the prior-year period’s levels.
Adjusted operating profit in the segment increased 10.8% from the prior year’s levels to $153.8 million. The adjusted operating margin was up 280 basis points (bps) year over year to 17.5%.
Intelligent Spaces Group or ISG generated net sales of $64.2 million, up 13% year over year. Our estimate for the metric was $65.9 million. Adjusted operating profit was $10.3 million, down 2.7% from a year ago. Adjusted operating margin was down 530 bps year over year to 16%.
Operating Highlights
Adjusted operating profit increased 9.9% to $153.9 million. Adjusted operating margin of 16.5% was up 250 bps year over year. Adjusted EBITDA rose 9% to $166.7 million from a year ago.
Financials
At the fiscal first quarter-end, Acuity Brands had cash and cash equivalents of $513.3 million compared with $397.9 million at the fiscal 2023-end. Long-term debt was $495.7 million, in line with the fiscal 2023-end.
During the fiscal first quarter, cash provided by operating activities totaled $190 million, up from $186.6 million in the prior-year period. Free cash flow was up 4.2% to $175.4 million in the first quarter of fiscal 2024.
During the first quarter of fiscal 2024, the company repurchased nearly 0.3 million shares of its common stock for $50 million.
Fiscal 2024 Outlook
For fiscal 2024, AYI expects net sales in the range of $3.7-$4 billion compared with the reported figure of $3.95 billion in the fiscal 2023.
For the year, adjusted earnings per share are expected in the range of $13-$14.50 compared with the value of $14.05 reported in fiscal 2023.
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% due to these changes.
VGM Scores
Currently, Acuity Brands has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Acuity Brands has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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