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Acuity Brands (AYI) Q2 Earnings Miss, Revenues Top Estimates

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Acuity Brands, Inc.’s (AYI - Free Report) shares declined nearly 5% on Apr 2, after it reported second-quarter fiscal 2020 results, wherein earnings missed the Zacks Consensus Estimate but revenues beat the same. Owing to lower demand and uncertainties arising from coronavirus outbreak, it refrained from providing fiscal 2020 guidance. Persistent economic uncertainties stemming from global trade issues and tariffs also remain a cause of concern.

Delving Deeper

In the quarter under review, adjusted earnings came in at $1.84 per share that lagged the Zacks Consensus Estimate of $1.88 by 2.1%. Earnings also declined 7.5% from the year-ago reported figure of $1.99 per share. The downside was primarily caused by lower pre-tax income.

Net sales during the quarter totaled $824.2 million, which topped the consensus mark of $796.9 million by 3.4%. However, the reported figure declined 3.5% from $854.4 million in the prior-year quarter. The downside was caused by 7% decline in volumes, partially offset by 1% positive impact of price/mix changes and approximately 3% contribution from acquisitions.

Acuity Brands Inc Price, Consensus and EPS Surprise

 

Acuity Brands Inc Price, Consensus and EPS Surprise

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

Operating Highlights

Adjusted gross margin improved 250 basis points (bps) on a year-over-year basis to 41.7%, despite lower volume. The improvement can be attributed to benefits from acquisitions, favorable channel mix and lower input costs. These were partly offset by the impact of lower net sales and higher cost due to the enacted tariffs.

Adjusted selling, distribution and administrative or SD&A expenses — contributing 29.4% to net sales — grew 340 bps from the year-ago figure. The increase was due to higher acquisition-related costs that include increase in employee costs and amortization of intangibles, more commissions, increased professional fees, as well as high variable incentive compensations.

Adjusted operating profit margin came in at 12.3%, down 90 bps year over year.

Financials

As of Feb 29, 2020, Acuity Brands had cash and cash equivalents of $381 million compared with $461 million at the end of fiscal 2019. In the first half of fiscal 2020, cash provided by operating activities totaled $214.7 million, reflecting an increase of 14% from $188.3 million in the prior-year period.

Fiscal 2020 Outlook

The company has been aggressively adapting the business to current market dynamics and responding to the COVID-19 pandemic. According to the company, the near-term economic impact of COVID-19 cannot be judged right now due to demand and other uncertainties, and its impact on fiscal 2020 results and beyond are therefore uncertain.

The company highlighted the fact that Acuity Brands continues to witness year-over-year revenue declines in retail. This is due to change in its home center strategy and corporate accounts as a result of the timing of relight projects at several large retailers. It expects these dynamics to continue in the near term.

Zacks Rank & Key Picks

Currently, Acuity Brands carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Construction sector include Century Communities, Inc. (CCS - Free Report) , TRI Pointe Group, Inc. (TPH - Free Report) and M.D.C. Holdings, Inc. (MDC - Free Report) . Although Century Communities and TRI Pointe Group sport a Zacks Rank #1, M.D.C Holdings carries a Zacks Rank #2 (Buy).

Century Communities, TRI Pointe Group and M.D.C Holdings’ earnings for the current year are expected to rise 11.1%, 6.8% and 10% year over year, respectively.

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