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Why Is Acuity Brands (AYI) Down 0.7% Since Last Earnings Report?
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It has been about a month since the last earnings report for Acuity Brands (AYI - Free Report) . Shares have lost about 0.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Acuity Brands due for a breakout? 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’ Q2 Earnings Beat, Adjusted EBITDA Up Y/Y
Acuity Brands reported mixed results for second-quarter fiscal 2023 (ended Feb 28, 2023), wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Earnings beat the consensus mark for the 11th consecutive quarter. Revenues missed the same for two quarters in a row following six straight quarters of beat.
On a year-over-year basis, both metrics rose as both the lighting and spaces businesses’ sales grew, adjusted operating profit expanded and adjusted earnings per share increased.
Delving Deeper
AYI reported adjusted earnings of $3.06 per share, which topped the consensus estimate of $2.54 by 20.5%. The metric also increased 19.1% from the year-ago reported figure of $2.57 per share.
Net sales of $943.6 million lagged the consensus mark of $960 million by 1.7% but increased 3.8% from the prior-year quarter’s levels.
Segment Details
Acuity Brands Lighting and Lighting Controls or ABL’s net sales rose 3.2% year over year to $890.8 million. Net sales in the Independent Sales Network were up 3.4% year over year to $635.3 million. Direct Sales Network sales were 13.8%, up from the prior-year period’s levels to $94.7 million. Retail sales of $50.4 million also increased 18% from the prior-year quarter’s levels. Sales in the Corporate Accounts channel grew 0.7% from the prior year’s levels to $54 million. The Original equipment manufacturer and other channels generated sales of $56.4 million, down 18.6% from the prior-year period’s levels.
Adjusted operating profit in the segment increased 5% from the prior year’s levels. The adjusted operating margin was up 30 basis points (bps) year over year.
Intelligent Spaces Group or ISG generated net sales of $58.2 million, up 16.4% year over year. Adjusted operating profit was $10.8 million, up 92.9% from a year ago. Adjusted operating margin was up 740 bps year over year to 18.6% from the previous year.
Operating Highlights
Adjusted operating profit increased 7.7% to $132.1 million. Adjusted operating margin of 14% was up 50 bps year over year. Adjusted EBITDA rose 6.5% to $144.8 million from a year ago.
Financials
At fiscal second quarter-end, Acuity Brands had cash and cash equivalents of $339 million compared with $223.2 million at the fiscal 2022-end. Long-term debt was $495.3 million, in line with the fiscal 2022-end.
For the first six months of fiscal 2023, cash provided by operating activities totaled $306.4 million, up from $127.3 million in the prior-year period. Free cash flow was up 162.4% to $270.8 million in the first six months of fiscal 2023.
During the first half of fiscal 2023, the company repurchased nearly 0.7 million shares of its common stock for $124.1 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
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 B on the value side, putting it in the second quintile 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 broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Acuity Brands has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Acuity Brands (AYI) Down 0.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Acuity Brands (AYI - Free Report) . Shares have lost about 0.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Acuity Brands due for a breakout? 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’ Q2 Earnings Beat, Adjusted EBITDA Up Y/Y
Acuity Brands reported mixed results for second-quarter fiscal 2023 (ended Feb 28, 2023), wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Earnings beat the consensus mark for the 11th consecutive quarter. Revenues missed the same for two quarters in a row following six straight quarters of beat.
On a year-over-year basis, both metrics rose as both the lighting and spaces businesses’ sales grew, adjusted operating profit expanded and adjusted earnings per share increased.
Delving Deeper
AYI reported adjusted earnings of $3.06 per share, which topped the consensus estimate of $2.54 by 20.5%. The metric also increased 19.1% from the year-ago reported figure of $2.57 per share.
Net sales of $943.6 million lagged the consensus mark of $960 million by 1.7% but increased 3.8% from the prior-year quarter’s levels.
Segment Details
Acuity Brands Lighting and Lighting Controls or ABL’s net sales rose 3.2% year over year to $890.8 million. Net sales in the Independent Sales Network were up 3.4% year over year to $635.3 million. Direct Sales Network sales were 13.8%, up from the prior-year period’s levels to $94.7 million. Retail sales of $50.4 million also increased 18% from the prior-year quarter’s levels. Sales in the Corporate Accounts channel grew 0.7% from the prior year’s levels to $54 million. The Original equipment manufacturer and other channels generated sales of $56.4 million, down 18.6% from the prior-year period’s levels.
Adjusted operating profit in the segment increased 5% from the prior year’s levels. The adjusted operating margin was up 30 basis points (bps) year over year.
Intelligent Spaces Group or ISG generated net sales of $58.2 million, up 16.4% year over year. Adjusted operating profit was $10.8 million, up 92.9% from a year ago. Adjusted operating margin was up 740 bps year over year to 18.6% from the previous year.
Operating Highlights
Adjusted operating profit increased 7.7% to $132.1 million. Adjusted operating margin of 14% was up 50 bps year over year. Adjusted EBITDA rose 6.5% to $144.8 million from a year ago.
Financials
At fiscal second quarter-end, Acuity Brands had cash and cash equivalents of $339 million compared with $223.2 million at the fiscal 2022-end. Long-term debt was $495.3 million, in line with the fiscal 2022-end.
For the first six months of fiscal 2023, cash provided by operating activities totaled $306.4 million, up from $127.3 million in the prior-year period. Free cash flow was up 162.4% to $270.8 million in the first six months of fiscal 2023.
During the first half of fiscal 2023, the company repurchased nearly 0.7 million shares of its common stock for $124.1 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
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 B on the value side, putting it in the second quintile 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 broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Acuity Brands has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.