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Acuity Brands Inc (AYI)
NYSE:AYI
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Acuity Brands
(NYSE:AYI)
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Rating:73Outperform
Price Target:
$359.00
â–²(11.40% Upside)
The score is driven primarily by solid financial fundamentals (strong profitability, ROE, and cash generation) and a constructive earnings update with growth and margin expansion while holding guidance. This is tempered by weak near-term technical signals (below key moving averages with negative MACD) and a valuation that looks only moderately attractive given the low dividend yield.
Positive Factors
Consistent Free Cash Flow Generation
High and consistent free cash flow (FCF conversion ~82%–90%, TTM FCF +28%) underpins durable financial flexibility. Strong FCF funds reinvestment, buybacks and debt repayment, supporting operations and strategic initiatives even if near-term sales cycle softens.
AIS Strategic Growth and Integration
Rapid AIS expansion (Atrius/Distech and QSC) and 22% segment margin reflect durable business-model diversification into higher-margin intelligent spaces. Integration wins and cross-product solutions create recurring service opportunities and stronger secular positioning in smart buildings.
Conservative Balance Sheet & Strong ROE
Moderate leverage and steadily growing equity with mid‑teens-plus ROE indicate capital-efficient operations and financial resilience. The balance sheet provides capacity for targeted M&A or investments while maintaining ability to absorb demand fluctuations.
Negative Factors
Tariff-Driven Margin Volatility
Ongoing, inconsistent tariffs and potential legal rulings introduce structural cost and pricing uncertainty. Recurrent tariff shocks can erode gross margins, complicate supplier strategy and pricing, and make multi-year margin visibility and planning more difficult.
Backlog Distortion and Seasonality Risk
Front‑loaded orders that inflated backlog may normalize, producing lumpy revenue and weaker near‑term comparables. This reduces forward visibility, complicates capacity planning and can mask true underlying end‑market demand for several quarters.
Acquisition-Related Leverage
Remaining acquisition debt from QSC increases leverage and repayment obligations. Elevated debt dampens financial flexibility, limits optionality for further investment or buybacks, and raises sensitivity to margin or revenue setbacks during integration periods.
Acuity Brands (AYI) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$9.98B
Dividend Yield0.18%
Average Volume (3M)291.33K
Price to Earnings (P/E)25.1
Beta (1Y)1.20
Revenue Growth13.14%
EPS Growth-6.09%
CountryUS
Employees13,200
SectorIndustrials
Sector Strength72
IndustryElectrical Equipment & Parts
Share Statistics
EPS (TTM)4.69
Shares Outstanding30,662,620
10 Day Avg. Volume351,341
30 Day Avg. Volume291,331
Financial Highlights & Ratios
PEG Ratio-4.19
Price to Book (P/B)3.70
Price to Sales (P/S)2.32
P/FCF Ratio18.90
Enterprise Value/Market Cap1.17
Enterprise Value/Revenue2.57
Enterprise Value/Gross Profit5.35
Enterprise Value/Ebitda17.25
Forecast
1Y Price Target
$401.25Price Target Upside24.51% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering6
EPS Forecast (FY)19.85
Revenue Forecast (FY)$4.74B
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 lighting products, which includes LED lighting fixtures, controls, and smart building solutions. The company has a robust revenue model supported by multiple key streams, including direct sales to customers, distribution agreements, and partnerships with contractors and architects. Additionally, Acuity Brands benefits from recurring revenue through its building management systems and software solutions, which offer ongoing service and support. The company also leverages strategic partnerships to expand its market reach and enhance product offerings, further contributing to its overall earnings.
Acuity Brands Key Performance Indicators (KPIs)
Acuity Brands Earnings Call Summary
Earnings Call Date:Jan 08, 2026
(Q1-2026)
| % Change Since: |
Next Earnings Date:Apr 02, 2026
Earnings Call Sentiment Positive
The call highlighted multiple material positives: strong top‑line growth (+20% sales), meaningful profit and margin expansion (+24% adjusted operating profit, EPS +18%), solid cash generation, successful integration and growth of AIS (including QSC), and product awards/customer wins that validate strategy. Headwinds include a tepid lighting market, tariff‑driven gross margin volatility and policy/legal uncertainty, backlog normalization that may depress near‑term seasonality (notably Q2), and some portfolio gaps in select vertical components. On balance, the company delivered clear operational and financial progress while acknowledging manageable near‑term market and policy headwinds.Q1-2026 Updates
Positive Updates
Strong Overall Revenue Growth
Total net sales of $1.1 billion, up $192 million or 20% year‑over‑year, driven by growth in both business segments and inclusion of three months of QSC sales.
Improved Profitability and EPS
Adjusted operating profit of $196 million, up $38 million or 24% versus prior year; adjusted operating profit margin expanded to 17.2% (+50 basis points). Adjusted diluted EPS of $4.69, up $0.72 or 18%.
Acuity Brands Lighting (ABL) Resilience
ABL sales of $895 million, up $9 million or 1% year‑over‑year despite a tepid lighting market; adjusted operating profit increased $6 million and ABL adjusted operating profit margin improved to 17.9% (+60 basis points).
Acuity Intelligent Spaces (AIS) Growth and Margin Expansion
AIS sales of $257 million (including three months of QSC), up $184 million year‑over‑year; both Atrius/Distech and QSC grew in the mid‑teens. AIS adjusted operating profit was $57 million with a 22% margin (+100 basis points year‑over‑year).
Cash Generation and Capital Allocation
Generated $141 million of cash flow from operations in the quarter, $9 million higher than prior year. Returned ~$28 million to repurchases (≈77,000 shares at ~$357 average) and repaid $100 million of the term loan during the quarter.
Product Innovation and Market Recognition
Launched new EAX area luminaire by Lithonia and expanded refuel offering with AIS integration (Atrius, Distech). Multiple product awards (Grand Prix de Design, Lit Lighting Design Awards, Nightingale awards) and AIS recognitions (Facilities Net Vision Award, NSCA Excellence in Product Innovation, ProAV Best in Market).
Customer Wins for Autonomous Spaces
Demonstrated integrated AIS solution (Distech RESETsmove + Q-SYS platform + lighting/shade controls) to a large multinational technology customer which chose to implement it across their headquarters, validating cross‑product value.
Negative Updates
Tepid Lighting Market and Macroeconomic Uncertainty
Management described the lighting market as 'tepid' with customers waiting for clarity on interest rates, inflation, and policy, which could limit near‑term demand despite company share gains.
Tariff-Related Gross Margin Pressure and Noise
Inconsistent tariff actions (multiple, timing‑varied tariffs) created margin volatility and 'noise' in gross profit; management noted tariffs have pressured margins and contributed to atypical seasonality.
Backlog Distortion and Near-Term Seasonality Risk
Elevated backlog from accelerated orders ahead of 2025 price increases favorably impacted Q4 FY25 and Q1 FY26; management cautioned this creates a normalization effect that could make Q2 weaker than historical seasonality.
Channel/Segment Noise (ISN vs DSN) and OpEx Variability
Divergence between Independent and Distribution Sales Networks added volatility (accounts move between networks), creating noisy short‑term comparisons; ABL OpEx reductions were partly already realized, muting sequential adjustments.
Product/Portfolio Gaps in Certain Vertical Components
While refuel solutions have expanded, management acknowledged gaps (e.g., digital signage) and competition from established players in some components of the convenience/refuel vertical.
Financing/Leverage from QSC Acquisition
Company repaid $100 million of term loan this quarter and stated it has repaid half of the $600 million of debt used to finance the QSC acquisition, indicating remaining acquisition‑related leverage and ongoing repayment needs.
Legal/Policy Uncertainty around Tariffs
Potential Supreme Court ruling on tariffs introduces uncertainty; management’s base case expects limited practical change, but legal outcomes could create complexity for pricing/industry adjustments.
Company Guidance
Management said guidance is unchanged from the Q4 release (the same sales and EPS guidance will be posted with the presentation) after a strong start to FY‑2026: consolidated net sales of $1.1B (+$192M, +20% YoY), adjusted operating profit $196M (+$38M, +24%), adjusted operating profit margin 17.2% (+50 bps), and adjusted diluted EPS $4.69 (+$0.72, +18%); by segment ABL sales were $895M (+$9M, +1%) with adjusted operating profit $160M and a 17.9% margin (+60 bps), AIS sales were $257M (+$184M, including three months of QSC) with adjusted operating profit $57M and a 22.0% margin (+100 bps); cash flow from operations was $141M (+$9M), the company repurchased ~$28M of stock (≈77,000 shares at ≈$357 avg), repaid $100M of its term loan this quarter and has now repaid half of the $600M used to finance QSC, and reiterated a longer‑term operating margin improvement target of roughly 50–100 bps per year.Acuity Brands Financial Statement Overview
Summary
Strong underlying quality: consistently high margins and ROE with reliable free-cash-flow conversion. Offsets include choppy recent revenue growth, some profitability cooling from FY2024 peaks, and modestly rising leverage versus earlier periods.Income Statement
AYI shows solid profitability with consistently strong gross margins (about 42%–48%) and healthy net margins (roughly 9%–11%) across the period. Revenue growth has been choppy—down in FY2023 and FY2024, then recovering to low-single-digit growth in TTM (Trailing-Twelve-Months). Margins have also cooled from FY2024 peaks, with TTM operating profitability running below the last two annual periods, suggesting some mix, pricing, or cost pressure despite stable end-market demand.Balance Sheet
The balance sheet looks sound with moderate leverage: debt-to-equity remains conservative (roughly 0.24–0.37), even with debt stepping up in the latest two periods versus FY2024. Equity has grown steadily over time, and returns on equity are consistently strong (mid-teens to ~20%), pointing to good capital efficiency. The main watch item is the upward drift in leverage versus FY2023–FY2024, which slightly reduces financial flexibility if demand weakens.Cash Flow
Cash generation is a clear strength. Free cash flow has been consistently high relative to net income (about 82%–90%), indicating earnings quality and disciplined reinvestment. TTM (Trailing-Twelve-Months) free cash flow growth is strong (+28%), and operating cash flow remains robust in absolute dollars. The key weakness is that operating cash flow has not consistently outpaced net income (coverage below 1.0 in most years, including TTM), implying some working-capital or timing headwinds that can create quarter-to-quarter volatility.| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 4.35B | 3.84B | 3.95B | 4.01B | 3.46B |
| Gross Profit | 2.08B | 1.78B | 1.71B | 1.67B | 1.48B |
| EBITDA | 655.30M | 665.00M | 588.50M | 603.20M | 520.50M |
| Net Income | 396.60M | 422.60M | 346.00M | 384.00M | 306.30M |
Balance Sheet | |||||
| Total Assets | 4.76B | 3.81B | 3.41B | 3.48B | 3.58B |
| Cash, Cash Equivalents and Short-Term Investments | 422.50M | 845.80M | 397.90M | 223.20M | 491.30M |
| Total Debt | 1.00B | 573.50M | 590.80M | 596.10M | 556.90M |
| Total Liabilities | 2.03B | 1.44B | 1.39B | 1.57B | 1.53B |
| Stockholders Equity | 2.72B | 2.38B | 2.02B | 1.91B | 2.04B |
Cash Flow | |||||
| Free Cash Flow | 533.00M | 555.20M | 511.40M | 259.80M | 364.90M |
| Operating Cash Flow | 601.40M | 619.20M | 578.10M | 316.30M | 408.70M |
| Investing Cash Flow | -1.28B | -65.10M | -90.70M | -62.20M | -117.90M |
| Financing Cash Flow | 255.40M | -104.50M | -312.90M | -512.40M | -362.60M |
Acuity Brands Technical Analysis
Negative
322.26
Price Trends
362.22
Negative
352.81
Negative
313.56
Positive
Market Momentum
-1.33
Positive
28.85
Positive
47.42
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 322.26 is below the 20-day moving average (MA) of 364.98, below the 50-day MA of 362.22, and above the 200-day MA of 313.56, indicating a neutral trend. The MACD of -1.33 indicates Positive momentum. The RSI at 28.85 is Positive, neither overbought nor oversold. The STOCH value of 47.42 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 25 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
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $5.80B | 18.50 | 18.22% | 0.67% | 6.17% | 20.86% | |
78 Outperform | $4.37B | 24.60 | 32.17% | 0.32% | 9.08% | 19.86% | |
76 Outperform | $16.57B | 29.03 | 8.57% | 0.84% | 5.31% | 5.76% | |
73 Outperform | $9.98B | 25.05 | 15.61% | 0.18% | 13.14% | -6.09% | |
67 Neutral | $7.96B | 57.77 | 11.80% | 0.18% | 17.18% | 235.76% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
52 Neutral | $2.29B | -129.14 | -1.11% | 2.02% | -10.98% | -103.99% |
* Industrials Sector Average
AYI
Acuity Brands
322.26
16.61
5.43%
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.