Earnings preview: What to expect from Acuity Brands Q3 2019 results

Acuity Brands Inc. (NYSE: AYI) is scheduled to report its earnings results for the third quarter of 2019 on Tuesday before the market opens. The results will be benefited by innovative lighting control solutions, energy-efficient luminaries like the Contractor Select portfolio, Atrius-enabled luminaires, and Holophane solutions.

Sales of LED-based luminaires are expected to account for about two-thirds of net sales. However, the North American lighting industry has been experiencing weak demand for luminaries over the last few quarters. Third-party forecasts and leading indicators suggest that the North American lighting market will increase in the low-single-digit range in fiscal 2019.

The company is expected to report tepid top-line growth during the recently-completed quarter due to the weak demand for larger nonresidential lighting projects. Over the long-term, the company continues to believe the execution of its strategy to provide attractive opportunities for profitable growth.

The company’s strategic objectives stood at the operating margin in the mid-teens or higher, diluted earnings per share growth in excess of 15% per annum, return on stockholders’ equity of 20% or better per annum, and cash flow from operations, excluding capital expenditures, is in excess of net income. The company expects to invest about 1.5% of net sales in capital expenditures during fiscal 2019.

From a long-term perspective, the company expects that its addressable markets have the potential to experience solid growth over the next decade, particularly as energy and environmental concerns come to the forefront. This along with emerging opportunities for digital lighting will play a key role in the IoT through the use of intelligent networked lighting and building automation systems.

In the past three years, the company not had a single customer that accounted for more than 10% of net sales. The company operates 19 manufacturing facilities, including nine facilities in the United States, six facilities in Mexico, two facilities in Europe, and two in Canada.

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Analysts expect the company’s earnings to increase by 5.50% to $2.50 per share and revenue to increase by 2.90% to $971.1 million for the third quarter. In comparison, during the previous year quarter, Acuity Brands posted a profit of $2.37 per share on revenue of $944 million. The company has surprised investors by beating analysts’ expectations in all of the past four quarters.

For the second quarter, the company reported a 32% dip in earnings due to lower income taxes as well as a shift in key customers, changes in sales channel mix, and higher input costs. The top line growth was driven by growth in sales volume and favorable impacts from acquisitions. Sales were negatively impacted by the pull forward of orders by customers into the first quarter in advance of price increases.

For the balance of fiscal and calendar 2019, the company remains cautiously optimistic and does not believe that the demand outlook has meaningfully changed from its outlook provided last quarter.

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