Shareholders of Acuity Brands, Inc. (NYSE:AYI) will be pleased this week, given that the stock price is up 10% to US$225 following its latest first-quarter results. It looks like a credible result overall – although revenues of US$935m were in line with what the analysts predicted, Acuity Brands surprised by delivering a statutory profit of US$3.21 per share, a notable 19% above expectations. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
See our latest analysis for Acuity Brands
Taking into account the latest results, Acuity Brands’ eight analysts currently expect revenues in 2024 to be US$3.87b, approximately in line with the last 12 months. Statutory earnings per share are predicted to rise 5.3% to US$12.82. In the lead-up to this report, the analysts had been modelling revenues of US$3.85b and earnings per share (EPS) of US$11.53 in 2024. Although the revenue estimates have not really changed, we can see there’s been a substantial gain in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 17% to US$233. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Acuity Brands, with the most bullish analyst valuing it at US$260 and the most bearish at US$170 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Acuity Brands’ past performance and to peers in the same industry. We would highlight that revenue is expected to reverse, with a forecast 0.6% annualised decline to the end of 2024. That is a notable change from historical growth of 2.4% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.9% annually for the foreseeable future. It’s pretty clear that Acuity Brands’ revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Acuity Brands’ earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn’t be too quick to come to a conclusion on Acuity Brands. Long-term earnings power is much more important than next year’s profits. We have forecasts for Acuity Brands going out to 2026, and you can see them free on our platform here.
You can also see our analysis of Acuity Brands’ Board and CEO remuneration and experience, and whether company insiders have been buying stock.
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Find out whether Acuity Brands is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
