The rapidly expanding Internet of Things (IoT) market, poised to hit $2.37 trillion by 2029, is paving the way for forward-looking investments. Smart city initiatives and advancements in 5G networks and AI are predicted to drive this industry forward, offering a vast addressable market for IoT stocks. Acuity Brands (AYI) has emerged as a contender in this digital revolution. A successful Fiscal 2024, marked by notable net sales growth across its lighting and space segments, has helped drive the stock up by over 70% in the past year.
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Recent acquisitions further bolster its product offerings in the horticultural lighting and intelligent refrigeration control systems sectors. The stock trades at a relative discount, making it a compelling option for investors interested in participating in the growing IoT market.
Acuity Expands its Offerings
Acuity Brands is a global provider of lighting, lighting controls, building management systems, and location-aware applications. The company operates through two primary segments: Acuity Brands Lighting and Lighting Controls (ABL) and the Intelligent Spaces Group (ISG).
The company has shown improved performance with increased net sales, margin expansion, and higher earnings per share. Recent developments, including acquiring the Arize horticultural lighting solutions, which adds depth to the Verjure family of horticultural lighting solutions, are also worth mentioning.
Additionally, in mid-2023, Acuity acquired KE2 Therm Solutions, a provider of intelligent refrigeration control systems. This acquisition will amplify the company’s ability to deliver advanced building automation solutions.
Analysis of Acuity’s Recent Financial Results
The company recently reported results for the Fiscal 2024 fourth quarter. Net sales rose 2% year-over-year to $1.03 billion, exceeding analysts’ projections by $20 million. Operating profit increased significantly by $47.3 million to $157.0 million. The adjusted diluted earnings per share (EPS) was $4.30, beating analysts’ expectations by $0.03.
For the full Fiscal year, net sales dropped from $3.95 billion in 2023 to $3.84 billion. Despite this, the operating profit rose by $79.9 million to $553.3 million, making up 14.4% of net sales, an increase of 240 basis points compared to the previous year. Adjusted earnings per share increased by 10.7% to $15.56.
For the Fiscal year of 2024, the company reported $619.2 million in net cash from operating activities, showing a rise of $41.1 million from the previous year. AYI has also repurchased approximately 454,000 shares of common stock, equating to roughly $89 million. In addition, the Board of Directors announced a quarterly dividend of $0.15 per share, payable on November 1, 2024, for shareholders on record as of October 18, 2024.
What Is the Price Target for AYI Stock?
The stock has been trending upward, climbing over 50% year-to-date. It trades at the high end of its 52-week price range of $156.84 – $307.25 and shows positive price momentum, trading above its 20-day (275.53) and 50-day (261.36). Despite the increase in share price, the stock trades at a slight discount to industry peers, with a P/E ratio of 22.8x, sitting below the Electrical Equipment & Parts industry average of 25.4x.
Analysts following the company have been cautiously optimistic about AYI stock. Based on five analysts’ cumulative recommendations, Acuity Brands is rated a Moderate Buy. The average price target for AYI stock is $319.25, representing a potential 4.05% change from current levels.
Final Analysis of Acuity Brands
Acuity Brands is well-positioned to reap the benefits of the rapidly growing IoT market. Fiscal 2024 saw substantial sales growth across its segments, with strategic acquisitions set to continue that growth into the next Fiscal year. Despite the rise in share price, the stock still trades at a minor discount compared to industry counterparts, indicating a promising investment opportunity in the burgeoning IoT market.
