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Will Low Demand Mar Acuity Brands' (AYI) Earnings in Q1?

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Acuity Brands, Inc. (AYI - Free Report) is slated to announce first-quarter fiscal 2020 results on Jan 9, before the opening bell.

In the last reported quarter, adjusted earnings missed the Zacks Consensus Estimate by 1.1%. Nonetheless, the said metric grew 2.6% year over year backed by higher price realization and productivity gains, despite continuing inflationary cost pressures and the impact of tariffs. Net sales lagged the consensus mark by 8.8%. Also, the reported figure declined 11.6% from the prior-year quarter, owing to a 16% decrease in volume, partially offset by positive impact of product price/mix changes.

Notably, the company delivered positive earnings surprise in five of the trailing six quarters.

Acuity Brands Inc Price and EPS Surprise

Acuity Brands Inc Price and EPS Surprise

Acuity Brands Inc price-eps-surprise | Acuity Brands Inc Quote

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been unchanged at $2.22 over the past 30 days. The estimated figure indicates a decrease of 4.3% from $2.32 per share reported in the year-ago quarter. Again, the consensus mark for revenues is pegged at $862.8 million, suggesting a 7.5% decrease from the year-ago reported figure of $932.6 million.

Let’s see how things have shaped up for this announcement.
 
Factors at Play

Acuity Brands is poised to benefit from the diversified portfolio of innovative lighting control solutions and energy-efficient luminaries. Again, strategic buyouts and joint ventures for expansion of its geographic borders and product portfolio are expected to aid the top line.

However, Acuity Brands continues to expect sluggish market demand for lighting products in fiscal 2020. Precisely, for fiscal first-quarter 2020, it expects net sales to decline in the mid-to-high single-digit range from fiscal first-quarter 2019. The downside is largely due to the pull forward of orders by customers in advance, as a result of announced price increases and its efforts to eliminate less-profitable products from the portfolio. Nonetheless, it anticipates The Luminaires Group — its recent acquisition — to mitigate the above-mentioned headwinds to some extent.

Meanwhile, Acuity Brands has been undertaking various cost-reduction initiatives like price increase. These initiatives are likely to have supported its bottom line in the to-be-reported quarter. Also, it initiated comprehensive reviews in two key areas, namely compensation, and environmental, social and governance or ESG. This ESG program — which includes feedback and insights from its shareholder base — has been helping the company to identify opportunities for driving efficiencies, reducing costs, enhancing positive impact on the environment, and increasing associate engagement and satisfaction.

However, the company and its various channel partners have been dealing with multiple price increases due to rising costs and tariffs. U.S.-China trade tensions and tariff-related woes are likely to have weighed on the company’s overall results in the to-be-reported quarter.

What Our Model Indicates

Our proven model predicts an earnings beat for Acuity Brands this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Currently, it has a Zacks Rank #3 and an Earnings ESP of +2.89%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are some other companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Continental Building Products, Inc. (CBPX - Free Report) has an Earnings ESP of +2.92% and a Zacks Rank #3.

Jacobs Engineering Group Inc. (J - Free Report) has an Earnings ESP of +3.58% and holds a Zacks Rank #3.

Floor & Decor Holdings, Inc. (FND - Free Report) has an Earnings ESP of +7.48% and a Zacks Rank #3.

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