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Product Innovation Aids Acuity Brands (AYI) Amid High Costs
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Acuity Brands, Inc. (AYI - Free Report) is benefiting from innovation across its diversified product portfolio. Also, its focus on Intelligent Spaces Group (ISG) and strategic acquisitions and divestitures bode well.
Recently, the company reported its first-quarter fiscal 2024 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Although the revenues declined year over year, earnings increased. Robust ISG net sales and enhanced margins in the Acuity Brands Lighting segment drove the upside.
Shares of AYI have gained 24.6% in the past three months compared with the Zacks industry’s rise of 20.9%. Earnings estimates for fiscal 2024 have moved north to $13.83 per share from $13.39 per share in the past seven days. This depicts analysts’ optimism about the stock’s growth potential.
Image Source: Zacks Investment Research
However, high R&D costs and a volatile business environment are a concern. 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 fiscal 2023.
Let’s discuss the factors substantiating its Zacks Rank #3 (Hold).
Major Growth Drivers
Product Innovation to Drive Growth
Acuity Brands is expanding its portfolio of innovative lighting control solutions and energy-efficient luminaries in response to the rapidly changing market trends. The company’s focus on innovation through product vitality and increasing service levels for the benefit of customers has delivered strong results.
The company continues to invest in productivity improvements. Earlier in the first quarter of fiscal 2024, a group of associates traveled to the Mexican manufacturing facilities to inaugurate the new state-of-the-art Santa Rosa production facility. This facility, equipped with a highly efficient new paint line, leverages technology to deliver better products to customers. It also enhances the efficiency of the paint line process while reducing environmental impact.
Emphasis on ISG Group Bodes Well
The company is focused on its ISG segment and 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.
At Distech, the focus is on expanding the addressable market geographically and increasing control of built spaces. During the first quarter of fiscal 2024, the company expanded into the UK, Asia, and Australia, adding new system integrators. 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 building spaces.
During the fiscal first quarter of 2024, ISG’s net sales grew 13% year over year to $64.2 million. This was driven by Distech’s continuous wins in business across new and existing customers, accompanied by modest benefits from the acquisition of KE2 Therm.
Focus on Expansion Through In-organic Moves
The company is committed to expanding its geographic borders and product portfolio through acquisitions and joint ventures. During third-quarter fiscal 2023, the company acquired KE2 Therm, enabling the company to enter the commercial refrigeration control space and expanding Distech's market reach.
The company is also engaged in its portfolio optimization through divestiture to drive growth. During fiscal 2023, it sold Sunoptics prismatic skylights business and discontinued Winona custom architectural lighting solutions.
Concerns
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 first-quarter fiscal 2024, the company reported net sales of $934.7 million, decreasing 6.3% from $1.11 billion reported in the prior-year period. The downside was due to lower sales within the ABL segment.
The company is going through supply chain challenges and rising costs of some components. Although the incremental cost of the technology is relatively low, the real cost of installation of that technology is still growing. Furthermore, an intensive focus on the innovation of energy-efficient lighting products like LED fixtures requires capital investments, thus increasing cost structure.
Key Picks
Here are some better-ranked stocks from the Zacks Construction sector:
Martin Marietta Materials, Inc. (MLM - Free Report) sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 37.3%, on average. Shares of MLM have increased 40.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MLM’s 2024 sales and earnings per share (EPS) suggests growth of 9.2% and 13.1%, respectively, from the year-ago period’s levels.
Armstrong World Industries, Inc. (AWI - Free Report) currently sports a Zacks Rank of 1. AWI delivered a trailing four-quarter earnings surprise of 7.9%, on average. The stock has surged 32% in the past year.
The Zacks Consensus Estimate for AWI’s 2024 sales and EPS indicates growth of 1.3% and 6.8%, respectively, from the previous year’s levels.
TopBuild Corp. (BLD - Free Report) carries a Zacks Rank of #2 (Buy). It has a trailing four-quarter earnings surprise of 14.3%, on average. Shares of BLD have increased 96.6% in the past year.
The Zacks Consensus Estimate for BLD’s 2024 sales and EPS indicates an increase of 7.1% and 4.9%, respectively, from the year-ago period’s levels.
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Product Innovation Aids Acuity Brands (AYI) Amid High Costs
Acuity Brands, Inc. (AYI - Free Report) is benefiting from innovation across its diversified product portfolio. Also, its focus on Intelligent Spaces Group (ISG) and strategic acquisitions and divestitures bode well.
Recently, the company reported its first-quarter fiscal 2024 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Although the revenues declined year over year, earnings increased. Robust ISG net sales and enhanced margins in the Acuity Brands Lighting segment drove the upside.
Shares of AYI have gained 24.6% in the past three months compared with the Zacks industry’s rise of 20.9%. Earnings estimates for fiscal 2024 have moved north to $13.83 per share from $13.39 per share in the past seven days. This depicts analysts’ optimism about the stock’s growth potential.
Image Source: Zacks Investment Research
However, high R&D costs and a volatile business environment are a concern. 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 fiscal 2023.
Let’s discuss the factors substantiating its Zacks Rank #3 (Hold).
Major Growth Drivers
Product Innovation to Drive Growth
Acuity Brands is expanding its portfolio of innovative lighting control solutions and energy-efficient luminaries in response to the rapidly changing market trends. The company’s focus on innovation through product vitality and increasing service levels for the benefit of customers has delivered strong results.
The company continues to invest in productivity improvements. Earlier in the first quarter of fiscal 2024, a group of associates traveled to the Mexican manufacturing facilities to inaugurate the new state-of-the-art Santa Rosa production facility. This facility, equipped with a highly efficient new paint line, leverages technology to deliver better products to customers. It also enhances the efficiency of the paint line process while reducing environmental impact.
Emphasis on ISG Group Bodes Well
The company is focused on its ISG segment and 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.
At Distech, the focus is on expanding the addressable market geographically and increasing control of built spaces. During the first quarter of fiscal 2024, the company expanded into the UK, Asia, and Australia, adding new system integrators. 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 building spaces.
During the fiscal first quarter of 2024, ISG’s net sales grew 13% year over year to $64.2 million. This was driven by Distech’s continuous wins in business across new and existing customers, accompanied by modest benefits from the acquisition of KE2 Therm.
Focus on Expansion Through In-organic Moves
The company is committed to expanding its geographic borders and product portfolio through acquisitions and joint ventures. During third-quarter fiscal 2023, the company acquired KE2 Therm, enabling the company to enter the commercial refrigeration control space and expanding Distech's market reach.
The company is also engaged in its portfolio optimization through divestiture to drive growth. During fiscal 2023, it sold Sunoptics prismatic skylights business and discontinued Winona custom architectural lighting solutions.
Concerns
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 first-quarter fiscal 2024, the company reported net sales of $934.7 million, decreasing 6.3% from $1.11 billion reported in the prior-year period. The downside was due to lower sales within the ABL segment.
The company is going through supply chain challenges and rising costs of some components. Although the incremental cost of the technology is relatively low, the real cost of installation of that technology is still growing. Furthermore, an intensive focus on the innovation of energy-efficient lighting products like LED fixtures requires capital investments, thus increasing cost structure.
Key Picks
Here are some better-ranked stocks from the Zacks Construction sector:
Martin Marietta Materials, Inc. (MLM - Free Report) sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 37.3%, on average. Shares of MLM have increased 40.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MLM’s 2024 sales and earnings per share (EPS) suggests growth of 9.2% and 13.1%, respectively, from the year-ago period’s levels.
Armstrong World Industries, Inc. (AWI - Free Report) currently sports a Zacks Rank of 1. AWI delivered a trailing four-quarter earnings surprise of 7.9%, on average. The stock has surged 32% in the past year.
The Zacks Consensus Estimate for AWI’s 2024 sales and EPS indicates growth of 1.3% and 6.8%, respectively, from the previous year’s levels.
TopBuild Corp. (BLD - Free Report) carries a Zacks Rank of #2 (Buy). It has a trailing four-quarter earnings surprise of 14.3%, on average. Shares of BLD have increased 96.6% in the past year.
The Zacks Consensus Estimate for BLD’s 2024 sales and EPS indicates an increase of 7.1% and 4.9%, respectively, from the year-ago period’s levels.