Acuity Brands, Inc. (AYI - Get Rating) is lighting up the financial stage with brilliance. In its fiscal fourth quarter, the company dazzled analysts by surpassing estimates for revenue and EPS. With a portfolio packed with innovative lighting solutions and sustainability at its core, AYI’s growth trajectory shines bright for the coming years.

In the fourth quarter, the company not only delivered exceptional financial results but also enhanced end-user satisfaction. A testament to its internal strength, AYI showed remarkable year-over-year progress in its Associate Engagement Survey, landing in the top 5% of high-performing companies.

Moreover, from fiscal 2020 through 2024, the company has enabled an estimated 34 million metric tons of greenhouse gas avoidance through its innovative products and services. These efforts underscore AYI’s commitment to driving change that benefits both the environment and its stakeholders.

In addition, the installation of a Tesla Megapack at its Santa Rosa Production Facility optimizes power infrastructure and slashes energy costs. The company has also implemented water-saving practices in its Guadalupe and Santa Rosa facilities, emphasizing its dedication to operational sustainability.

AYI’s stellar performance is mirrored in its stock trajectory. Over the past six months, the stock surged by 25.5%, and in the last year, it soared by 69.8%, closing the last trading session at $319.23. From sustainability to stock performance, the company has laid a strong foundation for growth.

Let us explore the factors that could further shape AYI’s journey in the near future.

Recent Developments

On October 24, AYI announced plans to acquire QSC, LLC, a leader in the evolving AV&C industry, for $1.22 billion. The acquisition strengthens AYI’s vision for smarter, safer, and greener spaces by integrating QSC’s advanced cloud-manageable audio, video, and control platform, driving innovation and sustainable growth.

Sound Historical Growth

Over the past three years, AYI has demonstrated consistent growth across key financial metrics. Its revenue grew at a CAGR of 3.5%, while EBITDA rose faster at 6.9%. Operational income (EBIT) and total assets expanded at CAGRs of 9% and 2.2%, respectively.

Notably, net income surged at a CAGR of 11.3%, and EPS climbed even higher at 17.1%, showcasing robust profitability.

Strong Financials

For the fiscal 2024 fourth quarter that ended August 31, AYI’s net sales increased 2.2% year-over-year to $1.03 billion. Its adjusted gross profit grew 7.2% from the year-ago value to $488.70 million. Moreover, the company’s adjusted operating profit rose 10% from the prior year’s quarter to $178.50 million.

Additionally, AYI’s adjusted net income and adjusted EPS increased 8.1% and 8.3% year-over-year to $135.50 million and $4.30, respectively. As of August 31, 2024, AYI’s cash and cash equivalents amounted to $845.80 million, compared to $397.90 million on August 31, 2023.

Favorable Analyst Estimates

Analysts predict AYI’s revenue and EPS for the fiscal 2025 first quarter that ended November 2024 to increase 2.5% and 4.1% year-over-year to $957.65 million and $3.87, respectively. The company has exceeded the consensus EPS estimates in each of the four trailing quarters, which is noteworthy.

For the full fiscal year 2025, ending August 2025, AYI’s revenue and EPS are expected to rise 5.9% and 8.2% from the previous year, reaching $4.07 billion and $16.84, respectively.

Plus, looking ahead to fiscal 2026, analysts anticipate further growth, with revenue and EPS forecasted to rise by 5.1% and 9.2% from the prior year, reaching $4.27 billion and $18.39, respectively.

High Profitability

AYI’s trailing-12-month gross profit margin of 46.39% is 44.8% higher than the industry average of 32.04%. Its trailing-12-month levered FCF margin stands at 12.17%, 79.9% higher than the industry average of 6.76%.

Additionally, AYI’s trailing-12-month asset turnover ratio of 1.06x outperforms the industry average of 0.79x by 35.3%. Moreover, the company boasts a trailing-12-month net income margin of 11%, which is 68.6% above the sector average of 6.53%.

POWR Ratings Reflects Optimism

AYI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

AYI has an A grade for Quality supported by profitability metrics that outperform the industry average. Within the B-rated Home Improvement & Goods industry, AYI is ranked #2 out of 57 stocks.

Beyond what is stated above, we have also given AYI grades for Value, Momentum, Growth, Sentiment, and Stability. Get all AYI ratings here.

Bottom Line

AYI’s sustainability initiatives, from substantial greenhouse gas reduction to enhanced operational efficiency, underscore its dedication to creating greener practices. Coupled with its strategic acquisition that aligns with its vision for smarter, safer, and more sustainable spaces, the company is positioning itself as a forward-thinking industry leader.

With strong financials, a proven track record of performance, and promising future estimates, AYI stands out as a compelling investment choice, instilling confidence in investors.

How Does Acuity Brands, Inc. (AYI) Stack Up Against Its Peers?

Although AYI’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit strong POWR Ratings. So, consider these A (Strong Buy) stocks from the Home Improvement & Goods industry:

Kingfisher plc (KGFHY - Get Rating)

HNI Corporation (HNI - Get Rating)

Steelcase Inc. (SCS - Get Rating)

To explore more A or B-rated Home Improvement & Goods stocks, click here.

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AYI shares were unchanged in premarket trading Wednesday. Year-to-date, AYI has gained 56.21%, versus a 28.02% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...

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