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Acuity Brands Inc (AYI)
NYSE:AYI
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Acuity Brands
(NYSE:AYI)
66Neutral
Positive Factors
Acquisition Benefits
The recent acquisition of QSC is anticipated to provide additional financial benefits that are currently underappreciated.
Earnings Growth
Gross margin improvements are expected to contribute to a material upside in earnings per share.
Management Execution
AYI management is recognized for excellent execution, which is expected to drive positive sentiment and valuation.
Negative Factors
Gross Margin Sustainability
AYI shares have not re-rated vs history due to rising interest rates and over-earning concerns with approximately 47% GM unsustainable.
Interest Rates Impact
AYI shares have not re-rated versus history due to rising interest rates and concerns about over-earning with an unsustainable gross margin.
Market Expansion Concerns
Expanding into a new market beyond lighting with a sizable deal gives some pause and likely other investors.
Acuity Brands (AYI) vs. S&P 500 (SPY)
Market Cap
$8.40B
Dividend Yield0.23%
Average Volume (3M)319.81K
Price to Earnings (P/E)20.3
Beta (1Y)1.35
Revenue Growth-0.80%
EPS Growth17.61%
CountryUS
Employees13,200
SectorIndustrials
Sector Strength67
IndustryIndustrial Goods
Share Statistics
EPS (TTM)13.59
Shares Outstanding30,959,297
10 Day Avg. Volume361,451
30 Day Avg. Volume319,806
Financial Highlights & Ratios
PEG Ratio1.15
Price to Book (P/B)N/A
Price to Sales (P/S)2.12
Price to Cash Flow (P/CF)15.50
P/FCF Ratio15.50
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$338.00Price Target Upside26.20% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
Acuity Brands Business Overview & Revenue Model
Company DescriptionAcuity Brands, Inc. provides lighting and building management solutions in North America and internationally. The company operates through two segments, Acuity Brands Lighting and Lighting Controls (ABL); and the Intelligent Spaces Group (ISG). The ABL segment provides commercial, architectural, and specialty lighting solutions, as well as lighting controls and components for various indoor and outdoor applications under the Lithonia Lighting, Holophane, Peerless, Gotham, Mark Architectural Lighting, Winona Lighting, Juno, Indy, Aculux, Healthcare Lighting, Hydrel, American Electric Lighting, Sunoptics, eldoLED, nLight, Sensor Switch, IOTA, A-Light, Cyclone, Eureka, Lumniaire LED, Luminis, Dark to Light, and RELOC Wiring Solutions brands. This segment serves electrical distributors, retail home improvement centers, electric utilities, national accounts, digital retailers, lighting showrooms, and energy service companies. The ISG segment offers building management systems and location-aware applications under the Distech Controls, Atrius, and Rockpile Ventures brands. This segment serves system integrators, as well as retail stores, airports, and enterprise campuses. Acuity Brands, Inc. was incorporated in 2001 and is headquartered in Atlanta, Georgia.
How the Company Makes MoneyAcuity Brands generates revenue primarily through the sale of its comprehensive lighting and building management solutions. The company's key revenue streams include the sale of lighting fixtures, lighting controls, and related components. Acuity Brands leverages advanced technologies, such as LED and IoT-enabled smart lighting solutions, to offer energy-efficient and cost-effective products. Additionally, the company benefits from strategic partnerships and a robust distribution network that includes electrical distributors, retail outlets, and online platforms. Acuity's earnings are further supported by demand for energy-efficient solutions driven by regulatory requirements and sustainability initiatives across various industries.
Acuity Brands Financial Statement Overview
Summary
Acuity Brands exhibits a solid financial profile with strong profitability and a stable balance sheet. The company effectively manages its operations, maintaining healthy profit margins and low leverage. Cash flow generation is positive, though there is some inconsistency in free cash flow growth. Overall, Acuity Brands is well-positioned in the Industrial Goods sector, with opportunities to enhance ROE and stabilize free cash flow fluctuations.Income Statement
Acuity Brands demonstrates strong profitability with a stable Gross Profit Margin and an improved EBIT Margin over the years. The company shows consistent revenue growth from 2020 to 2024 despite a slight decline in 2023. The Net Profit Margin has also remained healthy, indicating efficient cost management.75
Positive
Balance Sheet
The balance sheet shows a solid Equity Ratio, reflecting a strong equity base relative to assets. Additionally, the Debt-to-Equity Ratio remains low, indicating prudent leverage management. However, the Return on Equity (ROE) shows moderate performance, suggesting room for improvement in generating returns on shareholders' equity.70
Positive
Cash Flow
The cash flow statement indicates a positive Free Cash Flow trend, although the growth rate has fluctuated. The Operating Cash Flow to Net Income ratio is robust, suggesting strong cash generation relative to earnings. However, the Free Cash Flow to Net Income ratio indicates some variability in free cash flow conversion.65
Positive
| Breakdown | |||||
| TTM | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 | Sep 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 3.89B | 3.84B | 3.95B | 4.01B | 3.46B | 3.33B | Gross Profit |
| 1.73B | 1.78B | 1.71B | 1.67B | 1.48B | 1.40B | EBIT |
| 497.40M | 553.30M | 473.40M | 509.70M | 427.60M | 353.90M | EBITDA |
| 616.80M | 665.00M | 588.50M | 603.20M | 520.50M | 479.30M | Net Income Common Stockholders |
| 371.70M | 422.60M | 346.00M | 384.00M | 306.30M | 248.30M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 935.60M | 845.80M | 397.90M | 223.20M | 491.30M | 560.70M | Total Assets |
| 3.86B | 3.81B | 3.41B | 3.48B | 3.58B | 3.49B | Total Debt |
| 569.60M | 573.50M | 495.60M | 513.00M | 494.30M | 401.10M | Net Debt |
| -366.00M | -272.30M | 97.70M | 289.80M | 3.00M | -159.60M | Total Liabilities |
| 1.40B | 1.44B | 1.39B | 1.57B | 1.53B | 1.36B | Stockholders Equity |
| 2.46B | 2.38B | 2.02B | 1.91B | 2.04B | 2.13B |
| Cash Flow | Free Cash Flow | ||||
| 518.40M | 555.20M | 511.40M | 259.80M | 364.90M | 449.90M | Operating Cash Flow |
| 581.50M | 619.20M | 578.10M | 316.30M | 408.70M | 504.80M | Investing Cash Flow |
| -90.90M | ― | -90.70M | -62.20M | -117.90M | -359.80M | Financing Cash Flow |
| -262.20M | -104.50M | -312.90M | -512.40M | -362.60M | -50.30M |
Acuity Brands Technical Analysis
Negative
267.82
Price Trends
303.18
Negative
309.19
Negative
284.68
Negative
Market Momentum
-9.30
Negative
38.31
Neutral
59.51
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AYI, the sentiment is Negative. The current price of 267.82 is below the 20-day moving average (MA) of 271.78, below the 50-day MA of 303.18, and below the 200-day MA of 284.68, indicating a bearish trend. The MACD of -9.30 indicates Negative momentum. The RSI at 38.31 is Neutral, neither overbought nor oversold. The STOCH value of 59.51 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AYI.
Acuity Brands Risk Analysis
Acuity Brands disclosed 23 risk factors in its most recent earnings report. Acuity Brands reported the most risks in the “Legal & Regulatory” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Acuity Brands Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $81.89B | 36.22 | 26.73% | 0.81% | 21.25% | 24.59% | |
74 Outperform | $117.53B | 31.88 | 20.23% | 1.32% | 7.25% | 18.36% | |
71 Outperform | $18.32B | 24.11 | 25.26% | 1.47% | 4.76% | 2.27% | |
71 Outperform | $10.92B | 24.20 | 35.36% | 1.46% | -4.23% | -13.42% | |
69 Neutral | $30.45B | 33.95 | 26.22% | 1.90% | -11.28% | -23.69% | |
66 Neutral | $8.40B | 20.27 | 18.94% | 0.23% | -0.80% | 17.61% | |
62 Neutral | $8.27B | 14.02 | 2.58% | 3.08% | 3.83% | -15.91% |
* Industrials Sector Average
Performance Comparison
AYI
Acuity Brands
267.82
-0.33
-0.12%
APH
Amphenol
68.17
11.01
19.26%
ETN
Eaton
280.91
-27.79
-9.00%
HUBB
Hubbell B
342.00
-67.82
-16.55%
LECO
Lincoln Electric Holdings
194.86
-57.67
-22.84%
ROK
Rockwell Automation
268.08
-17.90
-6.26%
Acuity Brands Earnings Call Summary
Earnings Call Date: Jan 8, 2025 | % Change Since: -11.82% | Next Earnings Date: Apr 3, 2025
Earnings Call Sentiment Positive
The earnings call depicted a generally positive outlook for Acuity Brands with solid sales growth, strategic acquisitions, and strong performance in the Intelligent Spaces segment. However, there were minor challenges in the retail and corporate segments, and a slight decline in ABL operating margins.Highlights
Sales Growth and Profit Expansion
Acuity Brands reported net sales of $952 million for Q1 2025, a 2% increase year-over-year. Adjusted operating profit was $159 million, up by $5 million or 3% from the previous year, with an adjusted operating profit margin of 16.7%.
Intelligent Spaces Segment Growth
Sales in the Intelligent Spaces segment increased by 15% year-over-year to $74 million, with an adjusted operating profit margin of 21%, an improvement of 5 percentage points.
Acquisition of QSC
Acuity successfully closed the acquisition of QSC, enhancing the Intelligent Spaces business by integrating data interoperability technologies.
Strong Cash Flow and Balance Sheet
The company generated $132 million of cash flow from operations and ended the quarter with $936 million in cash. Share repurchases were resumed with approximately $5 million allocated to repurchase around 17,000 shares.
Recognition for Product Innovation
Several lighting solutions were awarded in the GRANDS PRIX DU DESIGN Awards and the Architect's Newspapers Best of Product Awards, highlighting Acuity's focus on product vitality and innovation.
Lowlights
Slight Decline in ABL Operating Margin
In the Acuity Brands Lighting segment, the adjusted operating profit margin was 17.3%, slightly down compared to the prior year.
Challenges in Retail and Corporate Accounts
While the independent sales network performed well, the retail channel faced challenges, and corporate accounts experienced inconsistent performance.
Company Guidance
During the Acuity Brands Fiscal 2025 First Quarter Earnings Call, the company provided guidance that reflects the acquisition of QSC, projecting net sales for the full fiscal year to range between $4.3 billion and $4.5 billion, with adjusted diluted earnings per share expected to be between $16.50 and $18. This guidance incorporates QSC's contribution, which will be included in the results starting January 2025. The company also anticipates full-year interest expenses to be between $20 million and $25 million, reflecting additional debt incurred to finance the acquisition. The guidance does not include synergies from the QSC acquisition, focusing instead on maintaining steady performance across the existing businesses.Acuity Brands Corporate Events
Business Operations and Strategy
Acuity Brands Announces Corporate Name Change to Acuity Inc.
Positive
Mar 12, 2025
On March 11, 2025, Acuity Brands, Inc. announced a corporate name change to Acuity Inc., effective March 26, 2025, as part of a rebranding strategy to align its business segments and promote a cohesive brand experience. This change reflects the company’s evolution and its strategy for growth, positioning Acuity as an innovator and disruptor in the industry, with a focus on creating stakeholder value and compounding shareholder wealth.
Executive/Board ChangesBusiness Operations and Strategy
Acuity Brands Announces Retirement of HR Chief
Neutral
Feb 13, 2025
On February 10, 2025, Dianne S. Mills, Senior Vice President and Chief Human Resources Officer of Acuity Brands, notified the company of her intent to retire from her role effective December 31, 2025. Post-retirement, Mills is expected to serve as a strategic advisor, although no compensation arrangements have been finalized. This transition could impact the company’s human resources operations and strategic planning.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.