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Here's Why You Should Retain Acuity Brands (AYI) Stock Now
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Acuity Brands, Inc. (AYI - Free Report) is benefiting from innovation across its diversified product portfolio. Also, its focus on Intelligent Spaces Group (ISG), accompanied by the strategic execution of other initiatives like cost-savings and in-organic steps, is encouraging.
Shares of this manufacturer and distributor of lighting fixtures and related components have risen 37.3% in the past year compared with the Zacks Building Products - Lighting industry’s growth of 32.3% and the Zacks Construction sector’s increase of 24.3%.
The Zacks Consensus Estimate for AYI’s fiscal 2024 earnings per share (EPS) indicates growth of 9.5%, from the previous year’s levels. This depicts analysts’ optimism about the stock’s growth potential. AYI also delivered a trailing four-quarter earnings surprise of 10.4%, on average. The positive trend signifies bullish analysts’ sentiments, robust fundamentals and outperformance in the near term.
Image Source: Zacks Investment Research
However, this Zacks Rank #3 (Hold) company is facing headwinds in the forms of economic uncertainties and high costs. For the fiscal 2024, AYI expects net sales in the range of $3.7-$4 billion compared with the reported figure of $3.95 billion in the fiscal 2023.
Let’s check some potential drivers of the company and major headwinds in detail.
Major Growth Drivers
Innovation Driving Growth: AYI prioritizes innovation initiatives that help it expand its diverse portfolio of lighting control solutions and energy-efficient luminaries. It focuses on innovation through product vitality and increasing service levels, which benefits customers and eventually increases growth prospects.
The company primarily focuses on its differentiated product portfolios, including Made-to-Order, Design Select and Contractor Select. During the third-quarter fiscal 2024 earnings call, Acuity Brands emphasized its current workings under the three differentiated product portfolios. The Made-to-Order portfolio sheds light on the restoration project of the Michigan Central Station in Detroit. Through the Design Select portfolio, the company takes in design options from Made-to-Order and curates them into an offering that delivers a highly-productive approach to project design, with ease of selection and service predictability. Coming to the Contractor Select differentiated product portfolio, about 300 high-volume products, which are used in common everyday lighting applications, are designed to be stocked and resold.
During the quarter, Acuity Brands announced its expansion into the refueling sector, which includes service stations, convenience stores and quick-service restaurants. It is developing tailored solutions for these markets in addition to its existing Lighting and Lighting Controls offerings.
Focus on ISG Group Bodes Well: The company is focused on the ISG segment and specializes in providing products and services that enhance the intelligence, safety and sustainability of spaces. ISG products and solutions are marketed under multiple brand names, including but not limited to Atrius and Distech Controls.
At Distech, the focus is on expanding the addressable market geographically and increasing control of built spaces. During third-quarter fiscal 2024, the company increased its systems integrator capacity in the U.K., Australia and Asia. It also partnered with the best SIs in specific geographies to sell its full suite of Distech and Atrius products.
During third-quarter fiscal 2024, ISG’s net sales rose 15% year over year to $75.7 million. The upside was driven by higher sales of Distech products, accompanied by modest benefits from the acquisition of KE2 Therm.
Strategic Margin-Driven Growth Initiatives: Acuity Brands' focus on business growth strategies, including inorganic moves and cost-saving measures, positively impacted its long-term outlook. It is committed to expanding its geographic borders and product portfolio through acquisitions and joint ventures. On Jan 19, 2024, AYI acquired certain assets related to Arize horticulture lighting products from Current Lighting Solutions, LLC.
It engages in ensuring price management to expand its margins and increase profitability prospects. The company's portfolio realignment, alongside ongoing product vitality efforts, enabled the facilitation of this strategy in the volatile market. The ongoing supply chain productivity enhancements continue to improve processes and manage costs. Adjusted operating margin of 17.3% in third-quarter fiscal 2024 expanded 100 basis points (bps) from the year-ago level.
Factors Hindering Growth
Volatile Business Environment: AYI operates in a highly-competitive industry, along with thriving on residential and non-residential construction, covering new, reconstruction and retrofit activities. These market aspects are vulnerable to volatility owing to several general business and economic factors, such as gross domestic product growth, employment levels, credit availability and other related factors.
During the fiscal third quarter, the company’s total net sales of $968.1 million, declined 3% from $1 billion reported in the prior-year period. Lower net sales within the ABL segment caused the downside.
Higher Costs: An intensive focus on the innovation of energy-efficient lighting products like LED fixtures requires capital investments, thus increasing cost structure. Although the incremental cost of the technology is relatively low, the real cost of installation of that technology is still growing.
Key Picks
Here are some better-ranked stocks from the Zacks Construction sector:
Sterling Infrastructure, Inc. (STRL - Free Report) carries a Zacks Rank of #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 17.4%, on average. Shares of STRL have surged 31.8% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for STRL’s 2024 sales and EPS indicates an increase of 9.7% and 26.6%, respectively, from the year-ago period’s levels.
Dycom Industries, Inc. (DY - Free Report) sports a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 30.2%, on average. Shares of DY have increased 88.8% in the past year.
The Zacks Consensus Estimate for DY’s 2025 sales and EPS suggests growth of 11% and 8.8%, respectively, from the year-ago period’s levels.
Armstrong World Industries, Inc. (AWI - Free Report) currently sports a Zacks Rank of 2. AWI delivered a trailing four-quarter earnings surprise of 15.4%, on average. The stock has surged 54.2% in the past year.
The Zacks Consensus Estimate for AWI’s 2024 sales and EPS indicates growth of 9.9% and 13.2%, respectively, from the previous year’s levels.
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Here's Why You Should Retain Acuity Brands (AYI) Stock Now
Acuity Brands, Inc. (AYI - Free Report) is benefiting from innovation across its diversified product portfolio. Also, its focus on Intelligent Spaces Group (ISG), accompanied by the strategic execution of other initiatives like cost-savings and in-organic steps, is encouraging.
Shares of this manufacturer and distributor of lighting fixtures and related components have risen 37.3% in the past year compared with the Zacks Building Products - Lighting industry’s growth of 32.3% and the Zacks Construction sector’s increase of 24.3%.
The Zacks Consensus Estimate for AYI’s fiscal 2024 earnings per share (EPS) indicates growth of 9.5%, from the previous year’s levels. This depicts analysts’ optimism about the stock’s growth potential. AYI also delivered a trailing four-quarter earnings surprise of 10.4%, on average. The positive trend signifies bullish analysts’ sentiments, robust fundamentals and outperformance in the near term.
Image Source: Zacks Investment Research
However, this Zacks Rank #3 (Hold) company is facing headwinds in the forms of economic uncertainties and high costs. For the fiscal 2024, AYI expects net sales in the range of $3.7-$4 billion compared with the reported figure of $3.95 billion in the fiscal 2023.
Let’s check some potential drivers of the company and major headwinds in detail.
Major Growth Drivers
Innovation Driving Growth: AYI prioritizes innovation initiatives that help it expand its diverse portfolio of lighting control solutions and energy-efficient luminaries. It focuses on innovation through product vitality and increasing service levels, which benefits customers and eventually increases growth prospects.
The company primarily focuses on its differentiated product portfolios, including Made-to-Order, Design Select and Contractor Select. During the third-quarter fiscal 2024 earnings call, Acuity Brands emphasized its current workings under the three differentiated product portfolios. The Made-to-Order portfolio sheds light on the restoration project of the Michigan Central Station in Detroit. Through the Design Select portfolio, the company takes in design options from Made-to-Order and curates them into an offering that delivers a highly-productive approach to project design, with ease of selection and service predictability. Coming to the Contractor Select differentiated product portfolio, about 300 high-volume products, which are used in common everyday lighting applications, are designed to be stocked and resold.
During the quarter, Acuity Brands announced its expansion into the refueling sector, which includes service stations, convenience stores and quick-service restaurants. It is developing tailored solutions for these markets in addition to its existing Lighting and Lighting Controls offerings.
Focus on ISG Group Bodes Well: The company is focused on the ISG segment and specializes in providing products and services that enhance the intelligence, safety and sustainability of spaces. ISG products and solutions are marketed under multiple brand names, including but not limited to Atrius and Distech Controls.
At Distech, the focus is on expanding the addressable market geographically and increasing control of built spaces. During third-quarter fiscal 2024, the company increased its systems integrator capacity in the U.K., Australia and Asia. It also partnered with the best SIs in specific geographies to sell its full suite of Distech and Atrius products.
During third-quarter fiscal 2024, ISG’s net sales rose 15% year over year to $75.7 million. The upside was driven by higher sales of Distech products, accompanied by modest benefits from the acquisition of KE2 Therm.
Strategic Margin-Driven Growth Initiatives: Acuity Brands' focus on business growth strategies, including inorganic moves and cost-saving measures, positively impacted its long-term outlook. It is committed to expanding its geographic borders and product portfolio through acquisitions and joint ventures. On Jan 19, 2024, AYI acquired certain assets related to Arize horticulture lighting products from Current Lighting Solutions, LLC.
It engages in ensuring price management to expand its margins and increase profitability prospects. The company's portfolio realignment, alongside ongoing product vitality efforts, enabled the facilitation of this strategy in the volatile market. The ongoing supply chain productivity enhancements continue to improve processes and manage costs. Adjusted operating margin of 17.3% in third-quarter fiscal 2024 expanded 100 basis points (bps) from the year-ago level.
Factors Hindering Growth
Volatile Business Environment: AYI operates in a highly-competitive industry, along with thriving on residential and non-residential construction, covering new, reconstruction and retrofit activities. These market aspects are vulnerable to volatility owing to several general business and economic factors, such as gross domestic product growth, employment levels, credit availability and other related factors.
During the fiscal third quarter, the company’s total net sales of $968.1 million, declined 3% from $1 billion reported in the prior-year period. Lower net sales within the ABL segment caused the downside.
Higher Costs: An intensive focus on the innovation of energy-efficient lighting products like LED fixtures requires capital investments, thus increasing cost structure. Although the incremental cost of the technology is relatively low, the real cost of installation of that technology is still growing.
Key Picks
Here are some better-ranked stocks from the Zacks Construction sector:
Sterling Infrastructure, Inc. (STRL - Free Report) carries a Zacks Rank of #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 17.4%, on average. Shares of STRL have surged 31.8% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for STRL’s 2024 sales and EPS indicates an increase of 9.7% and 26.6%, respectively, from the year-ago period’s levels.
Dycom Industries, Inc. (DY - Free Report) sports a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 30.2%, on average. Shares of DY have increased 88.8% in the past year.
The Zacks Consensus Estimate for DY’s 2025 sales and EPS suggests growth of 11% and 8.8%, respectively, from the year-ago period’s levels.
Armstrong World Industries, Inc. (AWI - Free Report) currently sports a Zacks Rank of 2. AWI delivered a trailing four-quarter earnings surprise of 15.4%, on average. The stock has surged 54.2% in the past year.
The Zacks Consensus Estimate for AWI’s 2024 sales and EPS indicates growth of 9.9% and 13.2%, respectively, from the previous year’s levels.