Bear of the Day: Acuity Brands (AYI) More
Acuity Brands, Inc. (AYI) missed for the second quarter in a row as the lighting market remains weak. This Zacks Rank #5 (Strong Sell) is expected to grow earnings by just 1.9% in Fiscal 2018.
Acuity Brands is one of the leading providers of lighting and building management solutions in North America. It has operations throughout North America, Europe and Asia.
It’s products are sold under various brands including Lithonia Lighting, Holophane, Peerless, Gotham, Mark Architectural Lighting, Juno, Indy, Aculux, Antique Street Lamps, nLight, ROAM, Atrius and Lucid, among others.
Another Miss in the Second Quarter
On Apr 4, Acuity reported fiscal second quarter results and missed the Zacks Consensus Estimate by 10.4%. Earnings were $1.89 versus the Zacks Consensus of $2.11.
It was the second miss in a row.
Sales were up 3.4% to $832.1 million from $804.7 million in the year ago quarter.
Lighting in the US was flat to down single digits so Acuity did exceed the industry standards, but non-residential construction lighting continues to be weak.
One bright spot was greater shipments of Atrius-based luminaires to customers in certain key vertical applications but this was partially offset by lower shipments for larger commercial projects and through the home center/showroom sales channel.
Estimates Slashed for Fiscal 2018 and Fiscal 2019
The company described the current lighting environment as “challenging” but third party forecasts indicate rising demand in the North American market later in calendar 2018.
However, the company has seen soft order activity in certain sales channels in the near term, which indicates continued market weakness.
It expects headwinds in the home center/showroom sales channel to continue in the near term, with growth returning in the second half of calendar 2018.
Not surprisingly, the analysts have taken a bearish view of earnings for both Fiscal 2018 and even Fiscal 2019.
8 estimates were cut for fiscal 2018 since the earnings report, with the Zacks Consensus Estimate dropping to $8.61 from $9.32 in that time. That is earnings growth of just 1.9% compared to 2017.
While analysts are also negative on fiscal 2019, they see a return to growth.
7 estimates were also cut for fiscal 2019, but one was raised, since the report as well. That has pushed the 2019 Zacks Consensus down to $9.61 from $10.03 just a month ago. That’s earnings growth of 11.6%.
Acuity was once the darling of Wall Street with the shares hitting new highs but they’ve fallen 49% over the last 2 years and are down 30% in 2018.
Acuity is shareholder friendly.
The company recently announced a larger share repurchase program which will be 15% of the company’s stock, or about 6 million shares. It has already been buying back shares.
Acuity also pays a dividend, which yields 0.4%.
With the share plunge, is this stock cheap?
Acuity trades with a forward P/E of 14.7. But with those earnings being cut, it looks more like a value trap.
For investors who want to get into this space, it’s difficult right now. Small cap LSI Industries (LYTS) is a Zacks Rank #4 (Sell) as well.
Investors may want to wait until later in the year to see if the lighting turnaround materializes.
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