Is Acuity Brands, Inc. (AYI) Sharp Price Movement Justified?

Acuity Brands, Inc. (NYSE:AYI) has been upgraded by Credit Suisse, which now rates the stock as Outperform versus Neutral prior rating, according to a note issued on March 06. Analysts at Credit Suisse, started covering the stock on October 12 with a Neutral rating. The stock won favor of Wells Fargo analysts who expressed their confidence in it using an upgrade from Market Perform to Outperform on September 21. Goldman analysts came out with bearish views on September 12 when the call was made. They think the stock is now Sell compared to to their prior call for Neutral.

AYI stock rose 1.04% in recent trade and currently has a stock-market value of $5.42B. The shares finished at $132.33, after trading as low as $131.04 earlier in the session. It hit an intraday high Wednesday at $133.6. Trading activity significantly weakened as the volume at ready counter decreased to 302,310 shares versus 372,780 in average daily trading volume over the past 20 days. So far this year, the volume has averaged about 398,804 shares. The stock is now 27.88% above against its bear-market low of $103.48 on December 24, 2018. It has retreated -30.74% since it’s 52-week high of $173.01 reached in September. Now the market price is down -12.25% on the year and up 15.12% YTD.

Wall Street’s most bullish Acuity Brands, Inc. (NYSE:AYI) analysts are predicting the share price to blow past $176 per share during the next 12 months. The current median share price forecast by them is $150, suggesting that the stock could increase 13.35% in that time frame. The average price target of $144.89 calls for a nearly 9.49% increase in the stock price.

Acuity Brands, Inc. (AYI)’s 50 day simple moving average (SMA 50) price is $124.45 and its 200-day simple moving average (SMA 200) price is $129.66. The company’s stock currently has a total float of 39.43M shares. Its weekly volatility is hovering around 1.98% and felt 2% volatility in price over a month. On the upside, the share price will test short term resistance at around $133.61. On a downside, the stock is likely to find some support, which begins at $131.05. The failure to get near-term support could push it to $129.76.

When looking at valuations, Acuity Brands, Inc. (AYI) has a cheap P/E of 16.79x as compared to industry average of 24.31x. Moreover, it trades for 12.83 times the next 12 months of expected earnings. Also, it is trading at rather expensive levels at just over 3.02x price/book and 1.44x price/sales. Compared to others, Acuity Brands, Inc. is in a different league with regards to profitability, having net margins of 9.5%. To put some perspective around this, the industry’s average net margin is 5.36%. AYI’s ROE is 21.3%, which is also considerably better than the industry’s ROE of 8.24%. It’s also very liquid in the near term, with a current ratio of 1.9. The stock has a debt/capital of 0.2.

Shares of AYI have gained 8.7% since the company’s most recent earnings report. Over the past 12 fiscal quarters, Acuity Brands, Inc. (NYSE:AYI) has topped consensus earnings estimates in 5 quarters (41%), missed earnings in 7 quarters (58%), whereas at 0 occasion EPS met analyst expectations. AYI last reported earnings that exceeded expectations. The company raked in $2.32 per share, -72.12% change on the same period last year. That was better than consensus for $2.14. Revenue for the recent quarter stood at $932.6 million, up 11% on last year and above the $922.61 million predicted by analysts. For this quarter, Wall Street analysts forecast revenue in a range of $940.35 million to $980.08 million, which should be compared with $908.9 million generated last year. EPS is seen in a range of $2.17 to $2.58, against the $2.44 reported a year ago.