It has been about a month since the last earnings report for Acuity Brands Inc AYI. Shares have lost about 12.7% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is AYI due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Second-Quarter Fiscal 2018 Results

Acuity Brands reported second-quarter fiscal 2018 adjusted earnings of $1.89 per share, missing the Zacks Consensus Estimate of $2.11 by 10.4%. Earnings increased 6.8% on a year-over-year basis. The upside can be attributed to the increase in net sales driven by greater shipments of its Atrius-based luminaires to customers in certain key vertical applications.

Net sales during the quarter were $832.1 million, ahead of the Zacks Consensus Estimate of $800.2 million. The figure also rose 3.4% year over year.

The improvement was mainly attributable to more than 6% increase in sales volume and a 1% favorable impact from changes in foreign exchange rates. These were partially offset by a 3.5% unfavorable change in product prices and mix of products sold (price/mix).

LED-based product sales represented approximately two-thirds of fiscal second-quarter net sales.

Operating Highlights

Gross profit margin was 40.2% in the quarter under review, reflecting a decrease of 150 bps year over year. Adjusted operating margin was 12.5%, down 290 bps year over year.

Adjusted selling, distribution and administrative or SD&A expenses were $231.3 million or 27.8% of quarterly net sales compared with $211.9 million or 26.3% a year ago.

Financials

Cash and cash equivalents, as of Feb 28, 2018, were $229.8 million, up from $311.1 million in fiscal 2017.

Net cash provided by operating activities was $178.3 million in the first six months of fiscal 2018, compared with $90 million a year ago.

Fiscal 2018 View

Acuity Brands is cautious about the current weakness in the lighting industry that has induced short-term challenges. However, the company continues to be optimistic about an improvement in conditions later in 2018. So, it looks to continue investments in attractive longe-term opportunities.

The company stays cautious about labor shortage in the construction industry and uncertainty related to both infrastructure spending as well as federal regulatory and trade policies, in the upcoming quarters.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. There have been seven revisions lower for the current quarter.

Acuity Brands Inc Price and Consensus

 

Acuity Brands Inc Price and Consensus | Acuity Brands Inc Quote

VGM Scores

At this time, AYI has an average Growth Score of C. Its Momentum is doing a lot better with an A. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for value and to a lesser degree growth.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It’s no surprise AYI has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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