Acuity Brands (AYI, Financial) had released strong results in the fourth quarter. The company reported solid improvement in the earnings and top line and is confident of posting better results in the upcoming quarters. Acuity Brands has posted an improvement in its financials for six straight quarters. Let us take a closer look at the overall business of Acuity Brands and see how it might perform.
Quarterly performance
Acuity Brands’ quarterly revenue rose by 15.3% to $668.7 million beating the analysts’ estimates of $649.2 million. In addition, the company is seeing robust demand for the LED products which also led to a rise in the sales volume by 17%. This rise in the sales of the company also helped it to gain market share. As a result the stock rose by 9%. Also, it posted a 22% growth in the net income beating consensus estimates of $1.22 per share by $0.04 per share.
Acuity Brands is on a smooth ride. The company is seeing good growth in overall metrics. It is seeing good demands for its LED products in the market. In addition, the robust growth momentum, delivering an impressive improvement in the financial is giving it confidence to perform better in future. This is not enough as there are other strong points which can be an attraction to the investors, helping it to gain much market share in the future such as solid revenue growth, good financial position with reasonable debt levels. However, Acuity might face some short term weakness in future, but this should not worry Acuity.
The way ahead
The company is bullish about its prospects for future profitable growth. There are many positive signs summing up around the lighting industry in future which can further drive Acuity Brands growing forward. Many analysts are forecasting that the growth rate for the North American lighting market will be on higher levels in 2015, giving the lighting companies such as Acuity a good opportunity to fetch more profits and improve its market position. This will surely improve the demands in the end markets. With this, Acuity is also expecting growth in renovation and talent improvement projects which is also a good opportunity for it.
To strengthen its position in the market, Acuity Brands is also bringing in new products and lighting solutions in fiscal 2015. Moreover, Acuity Brands also has aggressive investment plans in these initiatives. In addition, Acuity is engaged in developing holistic integrated lighting solutions for specific applications such as schools, healthcare facilities, and commercial office buildings and various outdoor applications.
This will strengthen its product portfolio of the company. It is also focusing on innovation to make its products competitive. It continues to develop luminaries incorporating with other light source technologies such as organic LEDs. With these, Acuity is focusing on expanding this award winning portfolio of products.
The company can face some weakness with the pricing. In certain markets, Acuity continues to experience some isolated pricing pressures. To cope up with this, Acuity continues to be vigilant in pricing. This pricing strategy is also expected to create a stiff market edge among the competitors in the market.
Conclusion
Now moving on the fundamentals, the stock looks slightly higher valued with a trailing P/E of 34.48 but its forward P/E of 22.67 indicates good earnings growth in the near term. However, in the long term its earnings are not so impressive as it is growing with a CAGR of 14.75% which is slightly lower than the industry average of 16.91%.
However, the valuations levels for the company is not so impressive but the smooth earnings growth record, new products in the market and expected robust growth in the lighting industry will surely benefit Acuity Brands in the long term. Thus, as of now the investors shouldn’t mind paying heavy premium for the stock as its valuation levels and prospects of the lighting industry are strong.
