Acuity Brands AYI continues to benefit from its consistent focus on input cost reduction and productivity strategy. Also, a diversified portfolio of innovative lighting-control solutions and energy-efficient luminaries are major positives. Consequently, shares of the company have gained 39.7% over the past year compared with its industry’s 33.5% rally.
Recently, Acuity Brands reported second-quarter fiscal 2021 results, wherein earnings beat the Zacks Consensus Estimate by 25.4%. The bottom line also grew 15.2% on a year-over-year basis. Its continuous focus to reduce costs, including the realignment of headcount with current volumes and a freeze on all non-essential employee travel, bodes well.
Major Growth Driver
Innovation Drives Growth: Acuity Brands is riding on its diverse portfolio of innovative lighting-control solutions and energy-efficient luminaries. The company is working on its different business models to realize consistent sales and earnings. In the first six months for fiscal 2021, it spent $21.2 million, mostly for new and upgraded information technology capabilities, equipment, and facility enhancements.
The company introduced a 254-nanometer technology to locally disinfect air in occupied and unoccupied spaces. In the fiscal first quarter, it had a major firmware release — Autonomous Bridging Technology or ABT — for nLight AIR products. The ABT is designed to increase the overall range of the nLight AIR system in networked environments by 300%, making connectivity more reliable.
Re-Alignment Across the Organization: Acuity Brands plans to separate the lighting, lighting-controls and components business, and the intelligent buildings business. To implement this plan, it intends to reorganize the business into two units — Acuity Brands Lighting and Intelligent Buildings.
Acuity Brands Lighting will include lighting, lighting controls and components businesses, and Intelligent Buildings will include Distech and Atrius. This change in structure will help Acuity Brands to meet customer demand and strengthen innovation through better categorization and alignment within each unit.
Inorganic Drives: The company is determined to expand its opportunities beyond the border through acquisitions and joint ventures. On Nov 25, 2019, it acquired LocusLabs, Inc. LocusLabs is a leading indoor mapping and location platform whose software supports navigation applications used in mobile devices, web browsers or digital displays in airports, event centers, multi-floor buildings and campuses.
On Sep 17, 2019, Acuity Brands acquired Canada-based The Luminaires Group (“TLG”) — a leading provider of specification-grade lightening solutions. On Jun 20, 2019, Acuity Brands acquired a New Castle, DE-based manufacturer of advanced optical components, WhiteOptics, L.L.C. The acquisition enhances its optical material offering, which will boost the performance of commercial and architectonic products.
Cost-Reduction Initiatives: To combat its lower sales volumes, Acuity Brands is continuously focusing on reducing its costs. The company’s margin expansion in the second quarter of fiscal 2021 is attributable to consistent cost control. The company’s selling, distribution and administrative expenses contracted $15.5 million in second-quarter fiscal 2021 from a year ago, primarily owing to lower freight costs and commissions associated with decreased sales. Adjusted operating profit margin was 14% of net sales for the second quarter of fiscal 2021, reflecting an increase of 170 basis points from the prior year. The advancement in operating margin was attributable to lower SD&A expenses and special charges.
Zacks Rank
Acuity Brands, which shares space with Orion Energy Systems, Inc. OESX, Energy Focus, Inc. EFOI, and LSI Industries Inc. LYTS in the Zacks Building Products – Lighting industry, currently carries Zacks Rank #2 (Buy). You can the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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