Acuity Brands (NYSE:AYI) reported robust performance in their fiscal fourth quarter and full year of 2023, despite a drop in sales in their lighting business. The company managed to increase its adjusted operating profit margin and adjusted diluted earnings per share. This was achieved through strategic realignment of their product portfolio and the introduction of Design Select, a move aimed at better serving lighting specifiers, distributors, and electrical contractors.
Key takeaways from the call include:
- Acuity Brands divested their Sunoptics daylighting business and exited Winona Custom Architectural Lighting Solutions, focusing on core growth areas.
- The company made significant strides in their Intelligent Spaces business, expanding their addressable market geographically and adding commercial refrigeration controls through the acquisition of KE2 Therm.
- The company demonstrated effective capital allocation and plans to maintain their strategic priorities in fiscal 2024. This aligns with InvestingPro Tips, which highlight the company's aggressive buyback of shares and its ability to maintain dividend payments for 22 consecutive years.
- Despite a decline in net sales in the lighting business, growth in the Intelligent Spaces business partially offset this, with net sales of approximately $1 billion in the fourth quarter.
- The company expanded adjusted operating profit margin to 16.1% and achieved adjusted diluted earnings per share of $3.97. According to InvestingPro Data, the company's EBITDA for LTM2023.Q4 stood at $593.5 million, reflecting a strong financial performance.
- For fiscal 2024, the company expects net sales to be within the range of $3.7 billion and $4 billion, with lighting sales expected to decline and Intelligent Spaces sales expected to grow.
During the earnings call, Neil Ashe, CEO of Acuity Brands, expressed confidence in the company's strategic price management and its ability to improve working capital and cash flow. He also highlighted the company's focus on growing its Intelligent Spaces Group and maintaining effective capital allocation.
Ashe noted that the company had returned to a more normal order and shipment relationship after burning through backlog in the first half of fiscal 2023. He mentioned that their portfolio is well-positioned for growth in various sectors, including retail, electrical distribution, and infrastructure.
Acuity Brands also emphasized the structural changes made in their lighting business to operate at higher margin levels and generate cash. Despite lower volumes, the company strategically managed price to balance the uplift in gross margin and maintained that they are appropriately pricing for the available market volume.
In terms of financial guidance for fiscal 2024, the company expects a decline in net sales for the first half, with a more normal year in the second half. The decline is primarily due to price, but the company is confident in its strategic price management. The company did not provide specific guidance for gross margin.
For fiscal 2024, Acuity Brands (NYSE:AYI) expects net sales to be within the range of $3.7 billion and $4 billion, with lighting sales declining by low to mid-single digits and Intelligent Spaces sales growing in the mid-teens. Adjusted diluted earnings per share are expected to be within the range of $13 to $14.50. The company's capital allocation priorities in 2024 remain unchanged, focusing on delivering margin and cash flow.
According to InvestingPro Data, Acuity Brands has a market cap of $5530 million and a P/E ratio of 15.25. The company has shown a 1 Year Price Total Return Y2023.D278 of 6.02% and a fair value, according to InvestingPro, of $209.92. For more insights, readers can access additional tips and metrics on InvestingPro, which provides real-time data and tips for investors.
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