Why Is Acuity Brands (AYI) Down 0.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Acuity Brands (AYI). Shares have lost about 0.1% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Acuity Brands Q1 Earnings Beat Estimates, Fall Y/Y

Acuity Brands reported first-quarter fiscal 2021 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Earnings beat estimates for the third straight quarter, whereas revenues surpassed the same for the fourth consecutive quarter. However, the metrics declined year over year due to the coronavirus pandemic, which has been affecting end-market demand.

Moreover, weakness in large industrial projects and decline in the price of certain products remain concerns.

Neil Ashe, president and chief executive officer of Acuity Brands, said, “Our Company delivered consistent financial performance in our first quarter amid the challenging market environment associated with the pandemic that continues to negatively impact our end markets.”

Delving Deeper

The company reported adjusted earnings of $2.03 per share that comfortably surpassed the  Zacks Consensus Estimate of $1.82 by 11.5%. However, the said metric declined 4.7% from the year-ago reported figure.

Net sales for the quarter totaled $792 million, which topped the consensus mark of $789 million. However, the reported figure declined 5.1% from $835 million in the prior-year quarter. The downside was caused by nearly 3% decline in independent sales due to the pandemic. Sales in the direct sales network declined 10% from a year ago, while the corporate accounts sales channel decreased 28% due to a decrease in renovation activity with large, big-box retailers. Moreover, decline in overall sales channels was partially offset by a 3% contribution from sales in the retail channel, mainly owing to higher demand for residential products.

Operating Highlights

Gross margin came in at 42%, down 60 bps on a year-over-year basis. Decrease in volume and lower price of certain products negatively impacted margin. This was partially offset by aggressive cost-reduction efforts and productivity improvements.

Adjusted selling, distribution and administrative or SD&A expenses came in at $228 million (28.8% of net sales) compared with $238 million (28.5% of net sales) in the prior-year quarter, reflecting an increase of 30 bps on a year-over-year basis. Adjusted operating profit for first-quarter fiscal 2021 was $104 million compared with $119 million in first-quarter fiscal 2020. Adjusted operating profit margin came in at 13.2% compared with 14.3% in the prior-year quarter.

Financials

As of Nov 30, 2020, Acuity Brands had cash and cash equivalents of $507 million compared with $561 million at fiscal 2019-end. In fiscal 2020, cash provided by operating activities totaled $124 million, reflecting an increase from $130 million in fiscal 2019.

Outlook

The company stated it will continue to invest in technology expansion and product portfolio of lighting, lighting controls, and intelligent buildings. Meanwhile, it continues to work on improving service capabilities. Although the company is uncertain about the economic environment due to the pandemic, it is cautiously optimistic about resuming stability in its end markets in fiscal 2021. Also, Acuity Brands continues to use strong cash generation capabilities to prioritize growth investments and share repurchases.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Acuity Brands has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile 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

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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