AYI - Acuity Brands' First-Quarter Earnings Preview: Expect Volatility
Acuity Brands (NYSE: AYI) plans to release first-quarter fiscal 2020 results on Thursday before the markets open. Shares of the industrial lighting and building controls manufacturer lagged the broader market last year, appreciating 20% in comparison to the S&P 500 index's gain of nearly 29%. That underperformance can be attributed in part to a lack of growth, as 2019 revenue of $3.7 billion was flat relative the prior year. Undoubtedly, investors are hoping for more lively top-line results in 2020. Before we see those results, let's review the company's guidance for the quarter, which ended Nov. 30, and also discuss why this manufacturing stock may experience volatile post-release price movement.
In its fiscal fourth-quarter 2019 earnings report, Acuity's management warned that it expected demand in the industrial lighting market to remain "sluggish" until global trade issues are resolved. The trade war and the tariffs that it features, coupled with the company's trend of generally flat revenue, set up a difficult comparison with the Q1 fiscal 2019, during which it notched year-over-year revenue growth of 11%.
Compounding this difficulty, management said it believed that sales might decline "in the mid-to-high single-digit percentage range" since part of the Q1 2019 sales jump resulted from customers pulling orders forward to get ahead of price increases that Acuity had announced to offset U.S. import tariffs. Management believes that significantly contributed to last year's Q1 sales increase, but it hasn't been able to quantify the effect. Thus, in the outlook shared last quarter, it stated that "...it is not possible to precisely know how this will impact this year's first-quarter results compared with the year-ago period."