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Acuity Brands (AYI) Down 0.7% Since Last Earnings Report: Can It Rebound?
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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, Inc. reported mixed third-quarter fiscal 2019 results, wherein earnings beat the Zacks Consensus Estimate but sales missed the same.
Adjusted earnings came in at $2.53 per share in the quarter, surpassing the consensus mark of $2.50 by 1.2%. The reported figure also increased 6.8% on a year-over-year basis on the back of improved sales, higher price realization and productivity gains, despite ongoing inflationary cost pressures and the impact of tariffs.
Notably, adjusted earnings excluded the impact of amortization expense of acquired intangible assets, share-based payment cost, acquisition-related items, special charges for streamlining activities, and excess inventory adjustments related to the closure of a facility.
Sales
Net sales during the fiscal third quarter came in at $947.6 million, missing the consensus mark of $970 million by 2.3%. However, the reported figure increased 0.4% year over year. The upside was attributed to more than 1% increase in sales volume, partly offset by unfavorable impact from changes in foreign exchange rates and the adoption of ASC 606. Meanwhile, contribution from acquisitions (net of divestitures) remained flat year over year in the quarter. Again, impact from product price/mix changes was flat year over year as higher pricing was offset by changes in the mix of products sold and customer mix within certain channels.
Operating Highlights
Adjusted gross profit margin declined 110 basis points (bps) to 40.5% on a year-over-year basis. Yet, third-quarter adjusted gross margin exceeded the 40% mark for the first time in a year and improved sequentially for the third quarter in a row. Higher sales and realized price, and benefits from productivity improvements were offset by a shift in key customers, changes in sales channel mix and increased input costs.
Adjusted selling, distribution and administrative or SD&A expenses — constituting 26.2% of net sales — improved 90 bps from the year-ago quarter. The upside was attributable to a decrease in freight and commission expense.
Adjusted operating margin came in at 14.3%, down 20 bps year over year.
Financials
Cash and cash equivalents, as of May 31, 2019, were $333.7 million compared with $129.1 million at the end of fiscal 2018.
Net cash provided by operating activities was $312 million in the first nine months of fiscal 2019 compared with $299.7 million a year ago.
Outlook
Despite reporting better-than-expected earnings in the fiscal third quarter, the company remains cautiously optimistic for the rest of fiscal 2019. Third-party forecasts and leading indicators continue to suggest that the North American lighting market is projected to increase in low-single digits during 2019.
Acuity Brands remains optimistic about the potentiality of the lighting and lighting-related industry. Also, it remains confident of the previously announced growth strategies that continue to improve products and solutions mix, while leveraging the fixed cost infrastructure in order to achieve its pre-determined target of achieving higher margins and overall profitability.
Shift in sales among key customers within the retail channel is expected to continue having a dampening effect on gross profit and margins. Nonetheless, it expects the impact from the same to be largely offset by lower freight and commission costs, included in SD&A expenses. In order to boost margin, the company initiated a review of a small portion of its product portfolio and services offering, and aims to eliminate items that do not meet its return objectives.
Meanwhile, Acuity Brands expects fiscal fourth-quarter net sales to be down modestly from the year-ago period, when the company was benefited by significant initial stocking of products in stores of a new customer in the retail sales channel.
Also, the company expects fourth-quarter net sales to be negatively impacted by its efforts to boost margin profile. The company has been focusing on programs for reviewing portions of its product portfolio and service offerings, with the objective of eliminating those items and activities that do not meet its return objectives. The company believes fourth-quarter adjusted operating profit margin to exceed from the prior-year level and improve on a sequential basis.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Acuity Brands has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. 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
Estimates have been trending upward for the stock, and the magnitude of this revision 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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Acuity Brands (AYI) Down 0.7% Since Last Earnings Report: Can It Rebound?
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 (AYI - Free Report) Q3 Earnings Beat Estimates, Sales Miss
Acuity Brands, Inc. reported mixed third-quarter fiscal 2019 results, wherein earnings beat the Zacks Consensus Estimate but sales missed the same.
Adjusted earnings came in at $2.53 per share in the quarter, surpassing the consensus mark of $2.50 by 1.2%. The reported figure also increased 6.8% on a year-over-year basis on the back of improved sales, higher price realization and productivity gains, despite ongoing inflationary cost pressures and the impact of tariffs.
Notably, adjusted earnings excluded the impact of amortization expense of acquired intangible assets, share-based payment cost, acquisition-related items, special charges for streamlining activities, and excess inventory adjustments related to the closure of a facility.
Sales
Net sales during the fiscal third quarter came in at $947.6 million, missing the consensus mark of $970 million by 2.3%. However, the reported figure increased 0.4% year over year. The upside was attributed to more than 1% increase in sales volume, partly offset by unfavorable impact from changes in foreign exchange rates and the adoption of ASC 606. Meanwhile, contribution from acquisitions (net of divestitures) remained flat year over year in the quarter. Again, impact from product price/mix changes was flat year over year as higher pricing was offset by changes in the mix of products sold and customer mix within certain channels.
Operating Highlights
Adjusted gross profit margin declined 110 basis points (bps) to 40.5% on a year-over-year basis. Yet, third-quarter adjusted gross margin exceeded the 40% mark for the first time in a year and improved sequentially for the third quarter in a row. Higher sales and realized price, and benefits from productivity improvements were offset by a shift in key customers, changes in sales channel mix and increased input costs.
Adjusted selling, distribution and administrative or SD&A expenses — constituting 26.2% of net sales — improved 90 bps from the year-ago quarter. The upside was attributable to a decrease in freight and commission expense.
Adjusted operating margin came in at 14.3%, down 20 bps year over year.
Financials
Cash and cash equivalents, as of May 31, 2019, were $333.7 million compared with $129.1 million at the end of fiscal 2018.
Net cash provided by operating activities was $312 million in the first nine months of fiscal 2019 compared with $299.7 million a year ago.
Outlook
Despite reporting better-than-expected earnings in the fiscal third quarter, the company remains cautiously optimistic for the rest of fiscal 2019. Third-party forecasts and leading indicators continue to suggest that the North American lighting market is projected to increase in low-single digits during 2019.
Acuity Brands remains optimistic about the potentiality of the lighting and lighting-related industry.
Also, it remains confident of the previously announced growth strategies that continue to improve products and solutions mix, while leveraging the fixed cost infrastructure in order to achieve its pre-determined target of achieving higher margins and overall profitability.
Shift in sales among key customers within the retail channel is expected to continue having a dampening effect on gross profit and margins. Nonetheless, it expects the impact from the same to be largely offset by lower freight and commission costs, included in SD&A expenses. In order to boost margin, the company initiated a review of a small portion of its product portfolio and services offering, and aims to eliminate items that do not meet its return objectives.
Meanwhile, Acuity Brands expects fiscal fourth-quarter net sales to be down modestly from the year-ago period, when the company was benefited by significant initial stocking of products in stores of a new customer in the retail sales channel.
Also, the company expects fourth-quarter net sales to be negatively impacted by its efforts to boost margin profile. The company has been focusing on programs for reviewing portions of its product portfolio and service offerings, with the objective of eliminating those items and activities that do not meet its return objectives. The company believes fourth-quarter adjusted operating profit margin to exceed from the prior-year level and improve on a sequential basis.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Acuity Brands has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. 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
Estimates have been trending upward for the stock, and the magnitude of this revision 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.