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Acuity Brands' (AYI) Q1 Earnings Surpass Estimates, Up Y/Y

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Acuity Brands, Inc. (AYI - Free Report) reported better-than-expected results in first-quarter fiscal 2019, with earnings and revenues surpassing the Zacks Consensus Estimate.

Adjusted earnings of $2.32 per share surpassed the consensus estimate of $2.16 by 7.4%. Also, the reported figure increased 19.6% on a year-over-year basis, backed by solid top-line growth of the company. The positive results were mainly driven by higher demand for small and medium-sized lighting solutions, along with growth of its building management solutions.

Acuity Brands Inc Price, Consensus and EPS Surprise

Sales

Net sales during the first quarter came in at $932.6 million, beating the consensus mark of $931.7 million. Also, the reported figure increased 10.7% year over year. The upside stemmed from 11% increase in sales volume, as well as a 1% favorable impact from acquisitions (net of divestitures). However, these positives were partially offset by a 1% negative impact from the adoption of ASC 606 as well as changes in foreign exchange rates.

Operating Highlights

Adjusted gross profit margin declined 350 basis points (bps) to 39.5% on a year-over-year basis.

Adjusted selling, distribution and administrative or SD&A expenses — down 20 bps from the year-ago quarter — constituted 25.2% of net sales. Adjusted operating margin came in at 14.4%, down 170 bps year over year.

Financials

Cash and cash equivalents, as of Nov 30, 2018, were $214.8 million compared with $129.1 million at the end of fiscal 2018.

Net cash provided by operating activities was $131.8 million in the fiscal first quarter compared with $139.8 million a year ago.

Outlook

Despite reporting better-than-expected results in the first quarter of fiscal 2019, the company said that it is “cautiously optimistic for fiscal 2019”. Third-party forecasts and leading indicators suggest that the North American lighting market is projected to increase in low-single digits in fiscal 2019.

Acuity Brands remains optimistic about the potentiality of the lighting and lighting-related industry. Also, it remains confident of its previously announced growth strategies that continue to improve products and solutions mix, while leveraging the company’s fixed cost infrastructure in order to achieve its pre-determined target of achieving higher margins and overall profitability.

Zacks Rank & Key Picks

Currently, Acuity Brands carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the Construction sector are Great Lakes Dredge & Dock Corporation (GLDD - Free Report) , Gates Industrial Corporation PLC (GTES - Free Report) and Lennox International, Inc. (LII - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Great Lakes’ earnings in 2018 are expected to increase 111%.

Gates Industrial has an expected earnings growth rate of 44.6% for 2018.

Lennox International has a projected earnings growth rate of 18.9% for 2018.

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