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Why Acuity Brands (AYI) Hit an All-Time High Today

NEW YORK (TheStreet) -- Acuity Brands Inc.  (AYI) soared 24% to an all-time high of $136.46 on Thursday after the company announced its strong results in its first quarter of fiscal 2014.

The Atlanta-based electronics manufacturer, which makes Lithonia Lighting, Holophane and Gotham brand products, reported that revenue rose approximately 20% year-over-year to $574.7 million, which was well above consensus, on higher volume of units sold. Earnings per share also jumped 39% to 96 cents, well above estimates of 84 cents. The company also noted in its report that the year-over-year growth in the first quarter was due "primarily to an increase in volume, partially offset by an estimated 1 percentage point net unfavorable change in product prices and mix of products sold." 

Acuity also closed two small production facilities in the first quarter in keeping with the restructuring it began in 2013 to cut costs, and the company estimated that it saved $3 million pre-tax thanks to the streamlining maneuvers. 

Acuity CEO Vernon Nigel said in the statement that the company's outlook remains positive.

"Third-party forecasts and leading indicators continue to suggest that the growth rate for the North American lighting market, which includes renovation and retrofit activity, will continue to be in the mid-single digit range during 2014."

As of 2:10 p.m. EST, Acuity was rising 15.36% to $126.93.

TheStreet Ratings team rates Acuity as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate ACUITY BRANDS INC (AYI) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AYI's revenue growth has slightly outpaced the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 12.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, AYI has a quick ratio of 1.75, which demonstrates the ability of the company to cover short-term liquidity needs.
  • ACUITY BRANDS INC has improved earnings per share by 32.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ACUITY BRANDS INC increased its bottom line by earning $2.94 versus $2.73 in the prior year. This year, the market expects an improvement in earnings ($3.96 versus $2.94).
  • Powered by its strong earnings growth of 32.05% and other important driving factors, this stock has surged by 55.63% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • 42.76% is the gross profit margin for ACUITY BRANDS INC which we consider to be strong. Regardless of AYI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.74% trails the industry average.
  • You can view the full analysis from the report here: AYI Ratings Report

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