Acuity Brands Missed Street Estimates. So What?

(RTTNews) - Acuity Brands, Inc. (AYI), providers of indoor and outdoor lighting and energy management solutions, missed Street estimates on both counts - Q4 EPS and revenue. The stock is currently trading down 8% at $234. But, we still believe in the bull story for AYI. We think the stock is positioned for upside in the short-term and for the long haul as well. So, any weakness in the stock should be seen as a buying opportunity.

Why we think so?

1. Although sales and EPS missed estimates, these Q4 numbers were still a record for the company.

Q4 results

*The company reported record net sales of $925.5 million, up 22% from year-ago $759.5 million. Consensus $946.5. *Net income was $82.9 million, up 38% from year-ago $60.1 million. *Earnings Per Share of $1.89 vs. year-ago $1.37. *Adjusted EPS was $2.21 vs. year-ago $1.74. Consensus $2.39.

2. During Q4, the company recorded pre-tax special charges of $4.9 million in connection with streamlining operations, including the integration of recent acquisitions. However, the management expects to realize annual savings equal to approximately twice the amount of the charge and to achieve the full annualized run-rate by the end of the second quarter of fiscal 2017.

3. During Q4, the company said it closed a manufacturing facility and transferred certain production to alternate locations. These actions overlapped with the ramping-up of a new manufacturing facility and the addition of a new paint line. The company said the combination of these actions created labor shortages, leading to canceled orders, as well as added costs. The short-term labor issues impacted more than $25 million of net sales in terms of canceled orders and led to additional overtime and other costs exceeding $2 million during the quarter. But, the actions implemented during Q4 are expected to positively impact business significantly, going forward, the company said.

4. The upbeat outlook of Vernon Nagel, Chairman, President, and Chief Executive Officer of Acuity Brands.

Mr. Nagel commented, "We remain bullish regarding the Company's prospects for continued future profitable growth.  We expect the growth rate for lighting and energy management solutions in the North American market, which includes renovation and retrofit activity and comprises over 97 percent of the Company's revenues, will be in the mid-to-upper single digit range for fiscal 2017 based on third-party forecasts and other key leading indicators. Our order rates through the month of September reflect this favorable trend.  Additionally, we believe that overall demand in our end markets will continue to experience solid growth over the next several years.  We expect to continue to outperform the growth rates of the markets we serve by executing our strategies focused on growth opportunities for new construction and renovation projects, expansion into underpenetrated geographies and channels, and growth from the continued introduction of new lighting and building management solutions as part of our integrated, tiered solutions strategy."