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Acuity Brands (AYI) Misses Q1 Earnings, Keeps FY17 View

Zacks

Acuity Brands, Inc. AYI reported first-quarter fiscal 2017 adjusted earnings of $1.88 per share (including stock option expenses), missing the Zacks Consensus Estimate of $2.06 by 8.7%.

Excluding stock option expenses, the company reported adjusted earnings of $2.00 per share, an increase of 13% from $1.77 a year ago.

Sales

Net sales during the quarter were $851.2 million, falling short of the Zacks Consensus Estimate of $887.1 million by 4.1%. The reported figure, however, increased 15.6% year over year.

The upside was mainly attributable to a 10% increase in volume and a 9% rise from acquisitions. These were partly offset by a net unfavorable change in product prices and mix of products sold (“price/mix”) of 2% and a 1% impact from changes in foreign currency exchange rates.

Volumes increased across most product categories and key sales channels during the quarter. LED-based product sales represented approximately two-thirds of the first-quarter net sales.

Operating Highlights

Adjusted gross profit margin was 42.4% in the first quarter, reflecting a decrease of 100 basis points (bps) year over year owing to the lower-than-expected sales volume. Adjusted operating margin was 16.8%, down 30 bps year over year.

Adjusted Selling, Distribution and Administrative or SG&A expenses were $218 million or 25.6% of quarterly net sales, compared with $194.1 million or 26.4% a year ago.

Financials

Cash and cash equivalents, as of Nov 30, 2016, were $451.2 million, up from $413.2 million in fiscal 2016. Long-term debt, less current portion, was $355.7 million, up slightly from $355 million at fiscal 2016-end.

Net cash provided by operating activities was $38.7 million in the fiscal first quarter, down 24.3% from $51.1 million a year ago.

Guidance

The company believes that lower demand will likely continue in the second quarter. Also, order activity in Dec 2016 reflected growth at a slower pace than what was witnessed over the past several quarters. Additionally, the second fiscal quarter typically marks the weakest quarter due to normal seasonality and the potential for year-end inventory rebalancing by certain customers.

The company had earlier stated that it will likely spend approximately 2.5% of its revenues as capital expenditures in fiscal 2017, which will support growth including tooling for new products, expansion and electronic capacity.

Acuity Brands projects growth rate for the North American lighting market (comprising over 97% of the company’s revenues) in the mid-to-upper single digit range for fiscal 2017.

Overall, Acuity Brands reaffirmed its fiscal 2017 outlook and expects demand in its end-markets to rise substantially over the next several years.

Zacks Rank

Acuity Brands currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Acuity Brands Inc Price, Consensus and EPS Surprise

Acuity Brands Inc Price, Consensus and EPS Surprise | Acuity Brands Inc Quote


Upcoming Peer Releases in the Construction Sector

KB Home KBH will release its fourth-quarter 2016 earnings on Jan 11. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 37 cents per share.

PulteGroup, Inc. PHM is slated to release its fourth-quarter 2016 earnings on Jan 26. The Zacks Consensus Estimate for the quarter’s earnings is 58 cents per share.

DR Horton Inc. DHI is likely to report its first-quarter fiscal 2017 results on Jan 24. The Zacks Consensus Estimate for the quarter’s earnings stands at 47 cents per share.

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