Why Acuity Brands, Inc. (NYSE: AYI) stock is crashing

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Acuity Brands, Inc. (NYSE: AYI) stock lost over 13.76% on 9th January, 2020 (Source: Google finance) after the company reported a 28% fall in the net income for the first quarter of fiscal 2020 to $57.0 million as compared with the prior-year period. Operating profit for the first quarter of fiscal 2019 also declined 28% to $83.6 million mainly due to a decline in net sales, higher share-based payment expense, and increased special charges for streamlining activities. The company has posted lower than expected results for the first quarter of fiscal 2020. The company is cautious about overall market conditions for the remainder of its fiscal 2020 on the back of continued economic uncertainties caused by global trade issues, including tariffs.

AYI in first quarter of FY 20 has reported the adjusted earnings per share of $2.13, missing the analysts’ estimates for the adjusted earnings per share of $2.21. The company had reported 10.5 percent fall in the adjusted revenue to $834.7 million in the first quarter of FY 20, missing the analysts’ estimates for revenue of $874.2 million. The fall in the revenue is due to a 16 percent fall in volume, which was partially offset due to a 3 percent net favorable change in price and mix of products sold and a contribution from acquisitions of about 2.5 percent. Further, the decline in net sales in the first quarter compared to the year ago period was driven in large part to the significant pull forward of orders last year as customers acted to avoid the impact of 2 announced price increases, one in September to help offset inflationary cost pressures and another in October due to enacted tariff increases on Chinese-made components and finished products.

Moreover, the demand in the first quarter for private nonresidential construction in general, and more specifically, lighting was soft than most market experts originally forecasted as the lighting market being down year-over-year in the low to mid-single-digit percentage range.

Additionally, the company has generated net cash provided by operating activities of $129.6 million for the first quarter of fiscal 2020 compared with $131.8 million for the year-ago period.  The company has generated cash and cash equivalents at the end of the first quarter of fiscal 2020 of $266.6 million, which reflects a decrease of $194.4 million since the beginning of the fiscal year.  During the first quarter of fiscal 2020, the Company has spent $302.0 million on acquisitions and paid dividends to stockholders of over $5 million.

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