Acuity Brands (AYI) Q4 Earnings Top Estimates, Margins Grow

Acuity Brands, Inc. (NYSE:AYI) reported fourth-quarter fiscal 2017 adjusted earnings of $2.55 per share, beating the Zacks Consensus Estimate of $2.40 by about 6.3% and increasing 15.4% year over year on solid operating margin expansion.

Including non-recurring items, the company reported earnings of $2.15 per share, up 14% from $1.89 a year ago.

Full-year adjusted earnings came in at $8.45 versus $7.84 a year ago.

Sales

The quarter’s net sales of $957.6 million missed the Zacks Consensus Estimate of $972.5 million by 1.5%. The reported figure, however, increased 3.5% year over year.

The upside was mainly attributable to a 4.5% increase in volume, partly offset by a net unfavorable change in product prices and mix of products sold (price/mix) of approximately 1%. Sales volume improved across most key product categories and sales channels.

Full-year net sales of $3,505.1 million increased 6.5% from the fiscal 2016 level.

Operating Highlights

Adjusted gross profit margin was 42.5% in the fourth quarter, reflecting a decrease of 100 basis points (bps) year over year due to higher warranty expense and labor costs.

Adjusted operating margin was 18.4%, up 150 bps year over year.

Adjusted selling, distribution and administrative expenses were $230.6 million or 24.1% of quarterly net sales compared with $245.8 million or 26.6% a year ago. This was primarily due to lower incentive compensation expenses.

Financials

Cash and cash equivalents, as of Aug 31, 2017, were $311.1 million compared with $413.2 million in fiscal 2016.

Net cash provided by operating activities was $316.2 million in fiscal 2017, down 8.5% from $345.7 million a year ago.

Notably, Acuity Brands completed the buyback of 2 million shares during fiscal 2017 under its previously authorized stock repurchase program at a total cost of $357.9 million.

Acuity Brands expects some volatility in demand among certain sales channels and geographies, including possible short-term volatility due to the recent hurricanes that hit Florida, Texas, and Puerto Rico. Nonetheless, it also expects the growth rate for lighting and building management solutions in the North American market, which includes renovation and retrofit activity and comprises more than 97% of its revenues, to be up low single digits for fiscal 2018, reflecting an expected rebound in the second half of the year.

The company expects the North American lighting market to return to growth in fiscal 2018. It also expects to continue outperforming market growth rates by executing strategies focused on opportunities for new construction and renovation projects, expanding into underpenetrated geographies and channels, and introducing lighting and building management.

Additionally, fiscal 2018 capital expenditures are expected to be approximately 2% of net sales.

Zacks Rank

Acuity Brands currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases in the Construction Sector

PulteGroup, Inc. (NYSE:PHM) is slated to release quarterly results on Oct 24. The Zacks Consensus Estimate for the quarter’s earnings is 60 cents per share, showing an expected increase of 38.8% year over year.

Masco Corporation (NYSE:MAS) will release quarterly results on Oct 24. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 53 cents per share, reflecting an expected year-over-year increase of 28.8%.

DR Horton Inc. (NYSE:DHI) is slated to report quarterly results on Nov 9. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 84 cents per share, showing an expected year-over-year increase of 11.5%.

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