Hot stock to watch: Acuity Brands, Inc. (NYSE: AYI)

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Acuity Brands, Inc. (NYSE: AYI) stock rose 7.18% on June 30th, 2020 (Source: Google finance) after the company delivered better than expected results for the fourth quarter of FY 20. Gross profit margin has expanded by 170 basis points (1.7 percentage points) to 42.2%, on the back of lower input costs, contributions from acquisitions and favorable sales mix, partially offset by lower average selling prices. AYI in the third quarter of FY 20 has reported the adjusted earnings per share of $1.94, beating the analysts’ estimates for the adjusted earnings per share of $1.22, according to the FactSet consensus. The company had reported 18.1 percent fall in the adjusted revenue to $776.2 million in the third quarter of FY 20, beating the analysts’ estimates for revenue of $741.6 million. The sales declined driven by a 20% fall in volume, mainly due to the negative impact on demand due to the COVID-19 pandemic, partially offset by the benefit from acquisitions of about 2%.

The company’s net income fell to $60.4 million from $88.4 million in the same-period a year ago. The company said there was still “great uncertainty” regarding demand and the timing of the economic recovery because of the pandemic, but it anticipates the pricing pressure and costs related to tariffs to continue in the fourth quarter. At the end of May, 2020 the company had a cash and cash equivalent balance of $521 million, which is an increase of $60 million since August 31, 2019

Moreover, the net sales through the independent sales network, which forms about 75% of the total net sales was down approximately 10% over the prior year. The performance compared with the year ago period was affected due to the fall in demand due to COVID and to a lesser extent unfavorable pricing, partially offset by the benefit of acquisitions. The net sales through the direct sales network had fallen down 31% over the prior year third quarter, mainly due to the weakness in large projects that had been postponed due to COVID as well as some large projects in the year ago period that did not repeat this year. Further, the lower shipments within the retail channel resulted in fall of 18% in this channel as compared to the prior year third quarter. The decline in this channel was mainly due to the impact of previously announced actions taken by the company to exit and phase out of certain products that have poor financial returns due to the impact of additional tariffs.

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