Acuity Brands Drops 5.5% Despite 1Q Profit Beat; Oppenheimer Stays Bullish

Shares of Acuity Brands fell 5.5% on Thursday even as the industrial technology company posted better-than-anticipated results for the first quarter of fiscal 2021 (ended Nov. 30)

Acuity Brands’ (AYI) adjusted EPS in the first quarter declined 4.7% year-over-year to $2.03 but surpassed analysts’ estimates of $1.86. Earnings were dragged down by lower sales and a decline in adjusted margins.

Meanwhile, first-quarter sales fell 5.1% year-over-year to $792 million but topped analysts’ expectations of $790.3 million. The company’s top line was impacted by lower revenue from direct sales and corporate accounts channels. That said, sales in the retail channel benefited from higher demand for residential products. (See AYI stock analysis on TipRanks)

The company cited lower volumes, declining prices on certain products and an unfavorable mix as the reasons for the decreased sales from the independent sales network. Meanwhile, sales in the direct sales network were adversely impacted by weakness in large industrial projects, which the company noted were impacted by the COVID-19 pandemic. The corporate accounts sales were hit by lower renovation activity with large, big-box retailers amid the current health crisis.

CEO Neil Ashe commented, “We continue to invest in our business to expand our technology and product portfolios in lighting, lighting controls, and intelligent buildings while we drive our transformation to improve our service capabilities.”

“While the recovery in the economic environment remains uncertain due to the impacts of the pandemic, we are cautiously optimistic about returning to stability in our end markets in calendar year 2021, and are excited about the opportunity that lies before us to transform our business and gain share,” Ashe added.

Following the release of the financial results, Oppenheimer analyst Christopher Glynn reiterated a Buy rating on the stock with a price target of $135. The analyst noted that management’s commentary reflects cautious optimism for end market stability returning in 2021 amidst macro uncertainties, continued market share execution and business model transformations as well as continued use of free cash flow for growth investments and share buybacks.

“AYI’s pristine balance sheet and targeted share repurchase complements continued steady execution amidst a period of softer end markets, underscoring strategic and competitive strengths in our view,” Glynn concluded.

Overall, Acuity Brands scores the Street’s Moderate Buy analyst consensus based on 2 Buys and 1 Hold. The average price target stands at $140, reflecting 15.5% upside potential over the coming year. Shares have declined 13.6% over the past year.

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