Acuity Brands Pops 13% After 2Q Earnings Beat, Sales Disappoint

Shares of Acuity Brands jumped 13.3% after the industrial technology company reported better-than-expected fiscal 2Q earnings, mainly driven by gross margin expansion. Meanwhile, net sales missed analysts’ expectations.

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Acuity Brands’ (AYI) 2Q adjusted earnings increased 15.2% year-over-year to $2.12 per share and beat the Street estimates of $1.73 per share. However, net sales declined 5.8% to $776.6 million, falling short of analysts’ expectations of $776.99 million.

The company’s Independent sales network and the Direct sales network remained flat on a year-over-year basis, while retail sales dropped 24.3%. Gross margin expanded by 170 basis points, primarily due to ongoing product and productivity improvements.

Acuity Brands CEO Neil Ashe said, “We continue to see signs of a modest recovery in the wider market, while our margin expansion reflects the hard work of our associates who continue to control costs in a more consistent and predictable way.” (See Acuity Brands stock analysis on TipRanks)

Following the fiscal 2Q results, Oppenheimer analyst Christopher Glynn reiterated a Buy rating and increased the price target to $190 (15.2% upside potential) from $140 “based on ~20x FY22E, considering increasingly firm revenue run rate and GM fundamentals, cyclical recovery runway beyond our FY22E, strong liquidity, and further operational upside potential.”

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 4 analysts suggesting a Buy, 1 analyst recommending a Hold and 1 analyst suggesting a Sell. The average analyst price target of $144.80 implies 12.2% downside potential to current levels. Shares have jumped 60.8% over the past six months.

Acuity Brands scores a 9 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.