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Innovative Luminaries Aid Acuity Brands Amid Margin Woes
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Acuity Brands, Inc.’s (AYI - Free Report) innovative lighting control solutions and energy-efficient luminaries, along with cost-control initiatives and strategic alliances are likely to drive growth. Also, strong liquidity position is supporting it to reach the growth targets.
In third-quarter fiscal 2020, it posted impressive earnings and revenues, which surpassed the Zacks Consensus Estimate by 50.4% and 0.2%, respectively. Strength in go-to-market channels, product portfolio and supply chain allowed the company to effectively serve customers despite COVID-19 destruction, which prompted a year-over-year decline in operating margins. The stock recorded notable 7.2% growth on Jun 30, post strong fiscal third-quarter results and solid gross margin improvement.
However, persistent COVID-19 impacts, absence of some large projects, pricing pressure and tariffs are likely to weigh on the bottom line.
Acuity Brands keeps on diversifying the product portfolio through continuous innovation of energy-efficient luminaries and lighting control solutions. Also, it focuses on expanding geographic borders via acquisitions and joint ventures. In addition to owning an attractive business model, the company is working on smart business strategies to achieve consistent sales and earnings growth.
In the wake of the COVID-19 pandemic, it has implemented various educational programs, contact tracing techniques, and increased engagement with communities to improve the current market situation and grow demand. Notably, its several core products witnessed sales growth during the fiscal third quarter with enhancements in the product portfolio and increased demand for do-it-yourself projects, as more people were at home and had the benefit of stimulus checks.
Additionally, it launched a new slot fixture from Mark Lighting during the quarter, in turn enhancing the product portfolio. On Jun 1, it strategically allied with Ushio America, Inc. (Ushio) to bring the powerful germicidal technology — Care222 UV disinfection module — to North American customers. (Read more: Acuity Brands and Ushio Partner for Care222 UV Light Module)
The company has undertaken various cost-saving actions like price increases and reduction in other costs that are expected to improve margins. Also, it is well positioned to mitigate the cost pressure owing to the COVID-19 outbreak. The company ended the fiscal third quarter with solid liquidity, including $520.6 million cash and cash equivalents, along with $396 million of available capacity on the $400-million revolving credit facility.
Headwinds
Current market conditions in the lighting industry continue to create a challenging environment for Acuity Brands, and other Building Products - Lighting players like LSI Industries Inc. (LYTS - Free Report) , Orion Energy Systems, Inc. (OESX - Free Report) and Energy Focus, Inc. (EFOI - Free Report) .
Fiscal third-quarter volume declined 20% year over year due to the coronavirus pandemic, in turn resulting in 18% fall in total net sales. It witnessed sales decline in almost all sales channels. The company’s near-term prospects cannot be determined right now as uncertainty surrounding demand and the timing of economic recovery persists.
In addition to the COVID-19 pandemic, unfavorable pricing, absence of some large projects, and its plans to exit and phase out of certain products that have poor financial returns — largely due to the impact of additional tariffs — are hurting the company. Meanwhile, it expects pricing pressure and rise in tariff-related costs to continue in fourth-quarter fiscal 2020.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Shutterstock
Innovative Luminaries Aid Acuity Brands Amid Margin Woes
Acuity Brands, Inc.’s (AYI - Free Report) innovative lighting control solutions and energy-efficient luminaries, along with cost-control initiatives and strategic alliances are likely to drive growth. Also, strong liquidity position is supporting it to reach the growth targets.
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In third-quarter fiscal 2020, it posted impressive earnings and revenues, which surpassed the Zacks Consensus Estimate by 50.4% and 0.2%, respectively. Strength in go-to-market channels, product portfolio and supply chain allowed the company to effectively serve customers despite COVID-19 destruction, which prompted a year-over-year decline in operating margins. The stock recorded notable 7.2% growth on Jun 30, post strong fiscal third-quarter results and solid gross margin improvement.
However, persistent COVID-19 impacts, absence of some large projects, pricing pressure and tariffs are likely to weigh on the bottom line.
Let’s take a look at the factors that are influencing the Zacks Rank #3 (Hold) company’s performance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Factors Driving Growth
Acuity Brands keeps on diversifying the product portfolio through continuous innovation of energy-efficient luminaries and lighting control solutions. Also, it focuses on expanding geographic borders via acquisitions and joint ventures. In addition to owning an attractive business model, the company is working on smart business strategies to achieve consistent sales and earnings growth.
In the wake of the COVID-19 pandemic, it has implemented various educational programs, contact tracing techniques, and increased engagement with communities to improve the current market situation and grow demand. Notably, its several core products witnessed sales growth during the fiscal third quarter with enhancements in the product portfolio and increased demand for do-it-yourself projects, as more people were at home and had the benefit of stimulus checks.
Additionally, it launched a new slot fixture from Mark Lighting during the quarter, in turn enhancing the product portfolio. On Jun 1, it strategically allied with Ushio America, Inc. (Ushio) to bring the powerful germicidal technology — Care222 UV disinfection module — to North American customers. (Read more: Acuity Brands and Ushio Partner for Care222 UV Light Module)
The company has undertaken various cost-saving actions like price increases and reduction in other costs that are expected to improve margins. Also, it is well positioned to mitigate the cost pressure owing to the COVID-19 outbreak. The company ended the fiscal third quarter with solid liquidity, including $520.6 million cash and cash equivalents, along with $396 million of available capacity on the $400-million revolving credit facility.
Headwinds
Current market conditions in the lighting industry continue to create a challenging environment for Acuity Brands, and other Building Products - Lighting players like LSI Industries Inc. (LYTS - Free Report) , Orion Energy Systems, Inc. (OESX - Free Report) and Energy Focus, Inc. (EFOI - Free Report) .
Fiscal third-quarter volume declined 20% year over year due to the coronavirus pandemic, in turn resulting in 18% fall in total net sales. It witnessed sales decline in almost all sales channels. The company’s near-term prospects cannot be determined right now as uncertainty surrounding demand and the timing of economic recovery persists.
In addition to the COVID-19 pandemic, unfavorable pricing, absence of some large projects, and its plans to exit and phase out of certain products that have poor financial returns — largely due to the impact of additional tariffs — are hurting the company. Meanwhile, it expects pricing pressure and rise in tariff-related costs to continue in fourth-quarter fiscal 2020.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>