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Acuity Brands Delivers, Even in Tough Times

Published 10/06/2021, 12:07 PM
Updated 10/06/2021, 04:01 PM
© Reuters.  Acuity Brands Delivers, Even in Tough Times

© Reuters. Acuity Brands Delivers, Even in Tough Times

You've got to love a company like Acuity Brands (NYSE:AYI).

The lighting and building system maker delivered a win despite growing challenges in the field. The story of the victorious underdog has been with us since Bible times, and it's always gratifying to see it again.

Acuity recently had its own David and Goliath story that ended much the same way when it brought out its earnings report. It's for that reason that I'm bullish on Acuity. (See Acuity stock charts on TipRanks)

The company brought in Q4 earnings of $3.27 per share. Wall Street consensus estimates were looking for $2.85, while a Zacks consensus was looking for $2.89.

The company also beat estimates for revenue. Acuity posted net sales of $992.7 million for fourth-quarter 2021. That represented a gain of 11.4% from the same time the previous year.

The company's full-year figures also offered a solid report. Acuity posted $427.6 million in operating profit for the full year, which was up 20.8% percent against last year's figures.

Wall Street's Take

Wall Street consensus analysis calls Acuity a Moderate Buy. Of the two analysts offering 12-month price targets on Acuity in the last three months, both consider the company a Buy.

The average Acuity price target comes in at $212.50, representing an upside potential of 8.3%.

Construction Waning?

We know that 2020 was a great year for construction of all types. People staying home prompted huge construction efforts as people renovated. Throw in a disturbed geopolitical situation — complete with regular riots in the summer of 2020 — and people started looking to depart the cities and go more rural.

That put a fire under many companies dealing in home supply or construction. To this day, there's still a housing boom on. Just five days ago, a house in Boston went on the market for $399,000. The house had recently been involved in a fire.

Earlier this summer, a house in Colorado Springs went on the market for $590,000. That house had been extensively vandalized inside. One agent noted that the smell inside the house — a combination of dead animals and rotting food — was sufficiently bad that those inside could “feel” it. It sold for $580,000, after a week on the market.

That's a boom by any standards. So it's not surprising to see Acuity deliver big numbers in that time. Yet, we're also well aware of the struggles under which it labored.

The costs of everything are on the rise. A veritable armada of cargo ships is currently mired off the coast of Los Angeles. Businesses are screaming for employees to the point where some Wendy's (NASDAQ:WEN) locations are offering free college to new hires.

Concluding Views

A company turning in big numbers during good times is nothing particularly attention-worthy. A company turning in big numbers in a rough environment is worth watching.

Yes, Acuity Brands has likely benefited from the construction boom that's still going on. At the same time, rising input costs limit its ability to respond to these booming conditions. There's a gold rush on, but everyone has a broken shovel.

That's why I'm bullish on Acuity Brands, at least for now. When the construction boom fades, then a lot of Acuity's gains will likely go with it.

For now, though, it's in a great position to supply material to all that new construction, and that should be good news. It's also proven its ability to deliver even as times get tougher. That gives it an edge going forward, even as the construction boom inevitably wanes.

Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

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