A month has gone by since the last earnings report for Acuity Brands (AYI Quick QuoteAYI - Free Report) . Shares have added about 11.5% in that time frame, outperforming 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 catalysts.

Acuity Brands Q3 Earnings Top Estimates, Declines Y/Y

Acuity Brands, Inc. reported impressive results in third-quarter fiscal 2020. Earnings and revenues surpassed the Zacks Consensus Estimate but declined year over year. Strength in go-to-market channels, product portfolio and supply chain allowed the company to effectively serve customers.

Neil Ashe, president and chief executive officer of Acuity Brands, said, “We are demonstrating the durability of our business and our continued ability to generate cash. However, there is still great uncertainty around demand and the timing of any economic recovery. Also, we expect pricing pressure and continued costs related to tariffs in the fourth quarter of fiscal 2020. As we look forward, we plan to continue to balance the management of our costs with the investment in our transformation and we have a robust new product portfolio that is positioned to benefit from a recovery in demand.”

Delving Deeper

The company reported adjusted earnings of $1.94 per share that comfortably surpassed the Zacks Consensus Estimate of $1.29 by 50.4%. However, the said metric declined 23.3% from the year-ago reported figure, primarily due to lower pre-tax income.

Net sales during the quarter totaled $776.2 million, which marginally topped the consensus mark of $774.63 million. However, the reported figure declined 18.1% from $947.6 million in the prior-year quarter. The downside was caused by a 20% decline in volume, mainly due to lower demand owing to the COVID-19 pandemic, partially offset by 2% contribution from acquisitions.

Operating Highlights

Gross margin improved 170 basis points (bps) on a year-over-year basis to 42.2% despite lower volume. The improvement can be attributed to benefits from acquisitions, favorable channel mix and lower input costs, partly offset by reduced average selling prices.

Adjusted selling, distribution and administrative or SD&A expenses — contributing 28.7% to net sales — grew 250 bps from the year-ago figure. The increase was due to higher acquisition-related costs. Adjusted operating profit margin came in at 13.5%, down 80 bps year over year.

Financials

As of May 31, 2020, Acuity Brands had cash and cash equivalents of $520.6 million compared with $461 million at the end of fiscal 2019. In the first nine months of fiscal 2020, cash provided by operating activities totaled $378.3 million, reflecting an increase from $312 million in the prior-year period.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months.

VGM Scores

Currently, Acuity Brands has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 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

Acuity Brands has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.