Why Is Acuity Brands (AYI) Up 0.6% Since Last Earnings Report?

It has been about a month since the last earnings report for Acuity Brands (AYI). Shares have added about 0.6% in that time frame, underperforming 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 drivers. Acuity Brands' Q4 Earnings & Sales Top EstimatesAcuity Brands reported solid results in fourth-quarter fiscal 2024 (ended Aug. 31, 2024), with earnings and net sales surpassing the Zacks Consensus Estimate. Earnings beat the consensus mark for the 18th consecutive quarter.While the Intelligent Spaces Group or ISG segment saw robust sales growth, the ABL segment showed tepid growth in the quarter. This mixed performance reflects the broader market dynamics, where traditional lighting may face headwinds, while intelligent spaces and connected solutions continue to gain traction.Acuity Brands’ ability to significantly improve its operating margins despite a modest gain in overall sales underscores its focus on operational efficiency and cost management. The company successfully expanded its gross and operating profit margins, driven by cost-saving initiatives across segments.Delving Deeper on Acuity Brands’ Q4 PerformanceAYI reported adjusted earnings per share (EPS) of $4.30, which topped the consensus estimate of $4.19 by 2.6%. The metric also increased 8.3% from the year-ago reported EPS of $3.97. Net sales of $1.03 billion beat the consensus mark of $1.01 billion by 2.3%. The metric also improved 2.2% from the prior-year quarter’s level.Segment DetailsAcuity Brands Lighting and Lighting Controls or ABL segment, responsible for the majority of sales, experienced a modest increase in the quarterly sales by 1.1% to $955 million. Net sales in the Independent Sales Network were up 0.2% year over year to $677.1 million. Sales from the Direct Sales Network were up 0.2% from the prior-year period’s level to $109.6 million.Retail sales of $42.6 million declined 8.6% from the prior-year quarter’s levels. Sales in the Corporate Accounts channel increased 24.6% from the prior-year quarter to $65.8 million. The original equipment manufacturer and other channels generated sales of $59.9 million, up 0.8% from the prior-year period’s levels.Adjusted operating profit in the segment grew 8.3% from the prior year’s levels to $171.9 million. The adjusted operating margin was up 120 bps year over year to 18%.Intelligent Spaces Group or ISG generated net sales of $83.9 million, up 16.7% year over year. Adjusted operating profit was $21.5 million, up 51.4% from a year ago. Adjusted operating margin was up 590 bps year over year to 22.9%.Operating HighlightsAdjusted operating profit increased 10% year over year to $178.5 million. Adjusted operating margin of 17.3% was up 120 bps year over year. Adjusted EBITDA rose 9.3% to $191.3 million from a year ago. Adjusted EBITDA margin expanded 120 bps to 18.5% from a year ago.AYI’s Fiscal 2024 HighlightsFull-year net sales declined 2.8% year over year to $3.84 billion. However, the company's adjusted operating profit was $639.6 million, up 7.1% from fiscal 2023. The adjusted operating margin also improved to 16.7% from 15.1% in the prior year. Adjusted EPS for the year also rose 10.7% to $15.56.Despite strong profit growth, Acuity Brands faced a decline in net sales due to lower sales in its ABL segment. This may be attributed to challenging market conditions and softer demand in certain lighting markets.For the full fiscal year, ABL’s net sales declined 4.0% to $3.57 billion. However, the segment’s adjusted operating profit rose 5.7% year over year to $624.2 million, driven by cost savings and improved efficiency. The full-year operating margin for ABL was 17.5%, up 160 bps from 15.9% in fiscal 2023.ISG reported net sales of $291.9 million for fiscal 2024, a 15.5% increase from the prior year. Adjusted operating profit for ISG was $63.4 million (up 26.5% from fiscal 2023), with an adjusted margin of 21.7% (up 190 bps from a year ago).FinancialsAt the fiscal 2024-end, Acuity Brands had cash and cash equivalents of $845.8 million compared with $397.9 million at the fiscal 2023-end. Long-term debt was $496.2 million, slightly up from $495.6 million in the fiscal 2023-end.During fiscal 2024, cash provided by operating activities totaled $619.2 million, up 7.1% from $578.1 million in 2023. Free cash flow was up 8.6% year over year to $555.2 million in fiscal 2024. During fiscal 2024, the company repurchased 454,000 shares of its common stock for $89 million.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a downward trend in estimates revision.VGM ScoresAt this time, Acuity Brands has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates 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 #2 (Buy). We expect an above average return from the stock in the next few months.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. 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