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Acuity Brands (AYI) Benefits From Product Vitality Amid High Costs
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Acuity Brands, Inc. (AYI - Free Report) is benefiting from product vitality and contributions from service in its lighting and spaces businesses. The Acuity Brands Lighting and Lighting Controls (ABL) segment contributed majorly to the company’s revenues.
Shares of AYI have gained 12% over the past six months, compared with the Zacks Building Products - Lighting industry’s growth of 8.8%.
Acuity Brands’ first-quarter fiscal 2023 earnings surpassed the Zacks Consensus Estimate by 12.7%. Also, the top and bottom lines increased 0.5% and 15.4%, respectively, year over year. The abovementioned tailwinds helped AYI maintain a growing trend.
Image Source: Zacks Investment Research
However, earnings estimates for second-quarter fiscal 2023 have remained unchanged at $2.54 per share over the past 60 days. The earnings estimates imply a 1.2% year-over-year decline despite 6.3% higher net sales. The increase in technology-related costs, business investments and commissions are likely to dent profit margins.
Let us discuss the factors broadly.
Growth Drivers
The major contributor to Acuity Brands’ top line is the ABL segment, accounting for approximately 95% of revenues in the first quarter of fiscal 2023. The company’s product vitality strategy is gaining consumer attention, which is helping in driving sales. Its vitality efforts include improvements to existing products and the introduction of new ones. The company mainly focuses on three areas, the first being strategic supplier relationships. Second, it focuses on the empowerment of its teams to prioritize access and speed over cost on available components and last the redesigning of products according to the available components by its highly-skilled engineers.
The Contractor Select portfolio bodes well for Acuity Brands, aiding it in maintaining its uptrend. The reintroduction of the DSX family of outdoor lighting in the first quarter of fiscal 2023 was a significant step forward in enhancing its outdoor offering through product vitality.
Also, the Intelligent Spaces Group’s (ISG) applications, Distech and Atrius ensured new customer engagements as well as the expansion of its services to existing customers. The company has a valuable and growing business thanks to Distech and Atrius.
Headwinds
Acuity Brands is facing high expenses due to an increase in research and development costs, and commissions. ABL being the major sales contributor witnessed a year-over-year decline of 90 basis points (bps) in adjusted operating profit margin to 14.7% in first-quarter fiscal 2023 due to higher commissions. Also, the incorporation of special charges in the said quarter impacted the overall margins of the company as well.
The 11.1% increase in the selling, general and administrative expenses in first-quarter fiscal 2023 was partially due to higher investments and commissions. This affected the margins of the company in the first quarter of fiscal 2023.
Some better-ranked stocks in the Zacks Construction sector are:
United Rentals, Inc. (URI - Free Report) currently carries a Zacks Rank #2 (Buy). Shares of URI have gained 38.5% in the past six months. The long-term earnings growth rate is anticipated to be 16.3%.
The Zacks Consensus Estimate for URI’s 2023 sales and EPS indicates growth of 20.3% and 29%, respectively, from the previous year’s reported levels.
Sterling Infrastructure, Inc. (STRL - Free Report) currently carries a Zacks Rank #2. STRL has a trailing four-quarter earnings surprise of 19.3%, on average. Shares of the company have gained 96.3% in the past six months.
The Zacks Consensus Estimate for STRL’s 2023 sales indicates a 0.8% decline, while that for EPS suggests 10.8% growth from the previous year’s reported levels.
Skyline Champion Corporation (SKY - Free Report) currently carries a Zacks Rank #2. SKY has a trailing four-quarter earnings surprise of 43.2%, on average. Shares of the company have gained 27.4% in the past six months.
The Zacks Consensus Estimate for SKY’s fiscal 2024 sales and EPS indicates a decline of 11.7% and 37.9%, respectively, from the previous year.
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Acuity Brands (AYI) Benefits From Product Vitality Amid High Costs
Acuity Brands, Inc. (AYI - Free Report) is benefiting from product vitality and contributions from service in its lighting and spaces businesses. The Acuity Brands Lighting and Lighting Controls (ABL) segment contributed majorly to the company’s revenues.
Shares of AYI have gained 12% over the past six months, compared with the Zacks Building Products - Lighting industry’s growth of 8.8%.
Acuity Brands’ first-quarter fiscal 2023 earnings surpassed the Zacks Consensus Estimate by 12.7%. Also, the top and bottom lines increased 0.5% and 15.4%, respectively, year over year. The abovementioned tailwinds helped AYI maintain a growing trend.
Image Source: Zacks Investment Research
However, earnings estimates for second-quarter fiscal 2023 have remained unchanged at $2.54 per share over the past 60 days. The earnings estimates imply a 1.2% year-over-year decline despite 6.3% higher net sales. The increase in technology-related costs, business investments and commissions are likely to dent profit margins.
Let us discuss the factors broadly.
Growth Drivers
The major contributor to Acuity Brands’ top line is the ABL segment, accounting for approximately 95% of revenues in the first quarter of fiscal 2023. The company’s product vitality strategy is gaining consumer attention, which is helping in driving sales. Its vitality efforts include improvements to existing products and the introduction of new ones. The company mainly focuses on three areas, the first being strategic supplier relationships. Second, it focuses on the empowerment of its teams to prioritize access and speed over cost on available components and last the redesigning of products according to the available components by its highly-skilled engineers.
The Contractor Select portfolio bodes well for Acuity Brands, aiding it in maintaining its uptrend. The reintroduction of the DSX family of outdoor lighting in the first quarter of fiscal 2023 was a significant step forward in enhancing its outdoor offering through product vitality.
Also, the Intelligent Spaces Group’s (ISG) applications, Distech and Atrius ensured new customer engagements as well as the expansion of its services to existing customers. The company has a valuable and growing business thanks to Distech and Atrius.
Headwinds
Acuity Brands is facing high expenses due to an increase in research and development costs, and commissions. ABL being the major sales contributor witnessed a year-over-year decline of 90 basis points (bps) in adjusted operating profit margin to 14.7% in first-quarter fiscal 2023 due to higher commissions. Also, the incorporation of special charges in the said quarter impacted the overall margins of the company as well.
The 11.1% increase in the selling, general and administrative expenses in first-quarter fiscal 2023 was partially due to higher investments and commissions. This affected the margins of the company in the first quarter of fiscal 2023.
Zacks Rank & Key Picks
Acuity Brands currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Construction sector are:
United Rentals, Inc. (URI - Free Report) currently carries a Zacks Rank #2 (Buy). Shares of URI have gained 38.5% in the past six months. The long-term earnings growth rate is anticipated to be 16.3%.
The Zacks Consensus Estimate for URI’s 2023 sales and EPS indicates growth of 20.3% and 29%, respectively, from the previous year’s reported levels.
Sterling Infrastructure, Inc. (STRL - Free Report) currently carries a Zacks Rank #2. STRL has a trailing four-quarter earnings surprise of 19.3%, on average. Shares of the company have gained 96.3% in the past six months.
The Zacks Consensus Estimate for STRL’s 2023 sales indicates a 0.8% decline, while that for EPS suggests 10.8% growth from the previous year’s reported levels.
Skyline Champion Corporation (SKY - Free Report) currently carries a Zacks Rank #2. SKY has a trailing four-quarter earnings surprise of 43.2%, on average. Shares of the company have gained 27.4% in the past six months.
The Zacks Consensus Estimate for SKY’s fiscal 2024 sales and EPS indicates a decline of 11.7% and 37.9%, respectively, from the previous year.