Why Is Acuity Brands (AYI) Up 10.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Acuity Brands (AYI). Shares have added about 10.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Acuity Brands due for a pullback? 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 Top Estimates, Sales Miss
Acuity Brands, Inc. reported mixed first-quarter fiscal 2023 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Earnings beat the consensus mark in four consecutive quarters, while revenues missed the estimate after beating the same for the third straight quarter.
Nevertheless, earnings and revenues increased on a year-over-year basis. The upside was backed by product vitality and service in its lighting and space businesses.
Pertaining to the quarterly release, Neil Ashe — chairman, president, and chief executive officer of Acuity Brands — said, "We expanded adjusted operating profit, substantially grew adjusted diluted earnings per share and generated strong cash flow from operations. We again created permanent shareholder value through share repurchases."
Delving Deeper
AYI reported adjusted earnings of $3.29 per share, which topped the consensus estimate of $2.92 by 12.7%. The metric also increased 15.4% from the year-ago reported figure of $2.85 per share.
Net sales of $997.9 million missed the consensus mark of $1,003 million and increased 0.5% from the prior-year quarter’s levels.
Segment Details
Acuity Brands Lighting and Lighting Controls or ABL’s net sales rose 7.2% year over year to $947.1 million. Net sales in the Independent Sales Network were up 5.8% year over year to $673.1 million. Direct Sales Network sales were 18.2% up from the prior-year period’s levels to $106.4 million.
Retail sales of $49.9 million grew 6.4% from the prior-year quarter’s levels. Sales in the Corporate Accounts channel improved 32.7% from the prior year’s levels to $49.1 million. The Other channel generated sales of $68 million, down 6.7% from the prior-year period’s levels.
Adjusted operating profit in the segment increased 0.4% from the prior year’s levels. The adjusted operating margin was down 90 basis points (bps) year over year.
Intelligent Spaces Group or ISG generated net sales of $56.8 million, up 22.4% year over year. Adjusted operating profit was $12.1 million, up 98.4% from a year ago. Adjusted operating margin was up 820 bps year over year to 21.3% from a year ago.
Operating Highlights
Adjusted operating margin came in at 14%, down 40 bps year over year. Adjusted EBITDA rose 4.1% to $153 million from a year ago.
Financials
At the end of first-quarter fiscal 2023, Acuity Brands had cash and cash equivalents of $284.1 million compared with $223.2 million at the fiscal 2022-end. For the fiscal first quarter, cash provided by operating activities totaled $186.6 million, up from $83.7 million in the prior-year period.
During the quarter, the company repurchased 0.5 million shares of its stock for $78 million.
Fiscal 2023 Guidance
AYI’s expectsnet sales to be between $4.1 billion and $4.3 billion. Net sales growth rates for ABL and ISG are expected to be 1 and 13, respectively. Adjusted EPS is expected to be within $13.00-$14.50.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -8.66% due to these changes.
VGM Scores
At this time, Acuity Brands has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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