Acuity Brands Q3 Results Miss Estimates

(RTTNews) - Lighting fixtures maker Acuity Brands, Inc. (AYI) reported Tuesday a profit for the third quarter that grew 38 percent from last year, reflecting improved operating margins and double-digit sales growth. However, both adjusted earnings per share and quarterly revenues missed analysts' expectations.

"We were pleased with our fiscal 2014 third quarter results as we continued to execute our strategies to extend our leadership position in North America. The year-over-year increase in net sales reflects continued favorable trends in our order rates as well as the continued adoption of LED lighting solutions, which nearly doubled over the prior year," Chairman, President and CEO Vernon Nagel said.

The Atlanta, Georgia-based company reported net income of $43.8 million or $1.01 per share for the third quarter, higher than $31.7 million or $0.73 per share in the prior-year quarter.

Results for the latest quarter include $0.01 per share gain associated with the prior-year fraud perpetrated at a freight payment and audit service firm formerly retained by the company, while the year-ago quarter included $0.12 per share of a similar charge.

Excluding special items, adjusted net income for the quarter was $43.3 million or $1.00 per share, compared to $41.9 million or $0.97 per share in the year-ago quarter.

On average, 14 analysts polled by Thomson Reuters expected the company to report earnings of $1.12 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 11.5 percent to $603.9 million from $541.50 million in the same quarter last year, but missed thirteen Wall Street analysts' consensus estimate of $609.09 million.

The company attributed the sales growth to a 13 percent increase in sales volume amid broad-based growth across most product categories and key sales channels in North America.

The company said sales of LED-based products nearly doubled from the year-ago period and represented more than a quarter of the total third-quarter net sales.

Operating profit margin expanded 280 basis points to 12.0 percent as selling, distribution, and administrative expenses as a percentage of total sales declined 200 basis points, partially offset by a 50 basis points reduction in gross margin.

The company continued to grow its portfolio of innovative lighting solutions as it recently introduced four new product families of organic LED or OLED, based luminaires making Acuity Brands one of the largest providers of OLED fixtures in the world. It also launched XPoint Wireless and xCella Wireless control systems.

"We remain very bullish about our prospects for future profitable growth. Third-party forecasts and leading indicators suggest that the growth rate for the North American lighting market, which includes renovation and retrofit activity, will be in the mid-to-upper single digit range during remainder of calendar 2014 with expectations that overall demand in our end markets will continue to gradually improve over the next several years," Nagel added.

The company noted that it plans to continue to accelerate its investment and production capabilities in electronic components for LED lighting solutions in order to capitalize on its growing market.

The company's management expects that the inefficiencies resulting from the ramp up of its electronic component production capabilities to continue to negatively impact gross profit margins over the next few quarters until volumes are at a sufficient level to absorb certain costs and initial production inefficiencies are mitigated.

Nagel concluded, "We believe the lighting and lighting-related industry will experience solid growth over the next decade, particularly as energy and environmental concerns come to the forefront, and we believe we are well positioned to fully participate in this exciting industry."

In Tuesday's regular trading session, AYI is currently trading at $126.05, down $12.20 or 8.82% on a volume of 0.83 million shares. In the past 52-week period, the stock has been trading in a broad range of $75.62 to $146.28.