Why Acuity Brands, Inc.(NYSE: AYI) stock is getting hammered today

Acuity Brands, Inc.(NYSE: AYI) in the first quarter of 2017 has reported the adjusted earnings per share of $2 missing the analysts’ estimates for earnings per share of $2.18. As a result, AYI stock lost over 13.4% on January 9th, 2017 (as of 11:20 AM EST; Source: Google finance).

Acuity Brands had reported the adjusted earnings per share of $1.77 in the first quarter 2016. AYI has posted 16% growth in the revenue of $851.2 million in the 1Q 2017, missing the analysts’ estimates of $887.1 million. The sales of LED-based products formed two-thirds of the first quarter of FY 17 total net sales. In addition, the growth in the net sales is mainly due to a 10 percent increase in volume and approximately 9 percent from acquired revenues from acquisitions. This is partially offset by approximately 2 percent net unfavorable change in product prices and mix of products sold and there is approximately 1 percent unfavorable impact from changes in foreign currency exchange rates.

Moreover, Acuity Brands has reported the 13% growth in the operating profit for the first quarter of fiscal 2017 over the year-ago period. Acuity Brands Net income for the first quarter of fiscal 2017 grew 19% to $81.7 million compared with the prior-year period. However, the company has posted 100 basis point decline in the adjusted gross profit margin of 42.4 percent due to the weaker than expected net sales volume, higher manufacturing costs, mostly related to short-term production challenges related to new product introductions, a rise in quality costs, and expected increases in certain employee wages and benefits. AYI has made continued investment in additional headcount to support the Tier 3 and 4 solutions.

On the other hand, Acuity Brands is investing in areas with significant growth potential that includes the expansion of the solid state luminaire and lighting controls portfolio. The company is building management and Internet of Things software platform.

However, the weakness in the first quarter of FY 17 will linger in the second quarter but the company sees positive growth rates for FY 17. For the FY 17, the company expects mid-to-upper single digit range for the for lighting and energy management solutions in the North American market, that includes renovation and retrofit activity. AYI has declared a quarterly dividend of 13 cents per share. The dividend is payable on February 1st, 2017 to shareholders of record on January 23rd, 2017.

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