Acuity Brands' Q1 Earnings Beat Estimates, Sales Miss, Stock Up

Acuity Brands, Inc. AYI reported mixed results in the first quarter of fiscal 2025 (ended Nov. 30, 2024). Earnings exceeded the Zacks Consensus Estimate, but net sales were below the same. Earnings beat the consensus mark for the 19th consecutive quarter. Acuity Brands stock rose 3.2% yesterday during the trading session.

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Solid contributions from the Intelligent Spaces segment and the company's focus on product vitality and innovation helped AYI drive sales and improve profitability. Notable launches, such as the TruWrap and REBL Round High-Bay, featured switchable technology that offered multiple functionalities and enabled higher-margin opportunities. AYI's segmentation strategy —Contractor Select, Design Select and Made to Order — helped the company align products with customer needs while enhancing operational efficiency.

The acquisition of QSC, finalized during the quarter, added to AYI's portfolio of disruptive technologies in the Intelligent Spaces segment. Although the full financial impact is expected later, the strategic move positioned the company for long-term revenue and profit growth by enabling seamless control over building operations.

Acuity Brands Inc Price, Consensus and EPS Surprise

Acuity Brands Inc price-consensus-eps-surprise-chart | Acuity Brands Inc Quote

A Look at Acuity Brands’ Q1 Performance

AYI reported adjusted earnings per share (EPS) of $3.97, which topped the consensus estimate of $3.89 by 2.1%. The metric also increased 6.7% from the year-ago reported EPS of $3.92.

Net sales of $951.6 million missed the consensus mark marginally by 0.04%. The metric improved 1.8% from the prior-year quarter’s level.

Acuity Brands’ Q1 Segment Details

The Acuity Brands Lighting segment, responsible for the majority of sales, experienced a modest increase in quarterly sales by 1.1% to $886 million. Our estimate for the metric was $885.3 million.

Net sales in the Independent Sales Network were up 3% year over year to $643.9 million. Sales from the Direct Sales Network were up 10.1% from the prior-year period’s level to $107.2 million.

Retail sales of $44.9 million declined 19.2% from the prior-year quarter’s levels. Sales in the Corporate Accounts channel decreased 21.2% from the prior-year quarter to $32.7 million. The original equipment manufacturer and other channels generated sales of $57.3 million, up 1.1% from the prior-year period’s levels.

The adjusted operating profit in the segment dropped marginally by 0.2% from the prior year’s levels to $153.5 million. The adjusted operating margin was down 20 basis points (bps) year over year to 17.3%.

Acuity Intelligent Spaces generated net sales of $73.5 million, up 14.5% year over year. The reported figure was almost in line with our estimate of $73.9 million. The adjusted operating profit was $15.4 million, up 49.5% from a year ago. The adjusted operating margin was up 500 bps year over year to 21%.

The Intelligent Spaces division's focus on data-driven solutions, such as systems integration and the use of cloud-connected technologies, is a key driver of growth. Acuity's mission to make spaces "smarter, safer, and greener" positions it well to capture market share in building management systems. Geographic expansion in regions like the UK, Asia and Australia also contributes to its momentum.

AYI’s Q1 Operating Highlights

The adjusted operating profit increased 3.1% year over year to $158.7 million. The adjusted operating margin of 16.7% was up 20 bps year over year. Adjusted EBITDA rose 2.9% to $171.6 million from a year ago. The adjusted EBITDA margin expanded 20 bps to 18% from a year ago.

Acuity Brands’ Financials

At the fiscal first quarter-end, Acuity Brands had cash and cash equivalents of $935.6 million compared with $845.8 million at the fiscal 2024-end. Long-term debt was $496.3 million, slightly up from $496.2 million in the fiscal 2024-end.

During the fiscal first quarter, cash provided by operating activities totaled $132.2 million, down from $190 million in fiscal 2024. Free cash flow was down 35.4% year over year to $113.3 million in the fiscal first quarter.

During the quarter, the company repurchased 17,000 shares of its common stock for $5 million.

Acuity Brands’ Expectations and Strategic Outlook

For fiscal 2025, Acuity Brands expects net sales between $4.3 billion and $4.5 billion (indicating growth from $3.84 billion reported in fiscal 2024), with adjusted EPS in the range of $16.50-$18.00 (depicting growth from $15.56 reported in fiscal 2024). The focus remains on maintaining a balance between growth and margin expansion. In Intelligent Spaces, growth will be driven by leveraging synergies from the QSC acquisition and continuing to innovate within Distech and Atrius offerings.

In lighting, Acuity Brands aims to outperform the market by expanding its presence in underpenetrated verticals and delivering value through strategic product segmentation like the Contractor Select and Design Select portfolios. The company’s investments in technology and product development will underpin its gross margin expansion over the long term.

The company also plans to allocate capital judiciously, prioritizing investments in core businesses and M&A opportunities while repaying acquisition-related debt within 12-18 months.

AYI’s Zacks Rank & Key Picks

Acuity Brands currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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