Morgan Stanley upgraded Acuity Brands (AYI) to Overweight from Equal Weight with a price target of $37, down from $304. The firm says structurally higher growth and gross margin are not reflected in consensus estimates nor Acuity Brands’ valuation. It models “material” earnings upside on firmer gross margin and “underappreciated accretion” from the recently closed QSC acquisition. Acuity “continues to display lights out execution” and upside from the QSC deal should further boost sentiment, pushing the equity towards compounder status and serving as a tailwind for the stock’s valuation, the analyst tells investors in a research note.
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