Core Insights - Zacks Premium provides tools for investors to enhance their stock market engagement and confidence through various research services [1] - The Zacks Style Scores are designed to help investors identify stocks with the highest potential to outperform the market in the short term [1] Zacks Style Scores Overview - Each stock is rated from A to F based on value, growth, and momentum characteristics, with A being the highest score [2] - The Value Score focuses on identifying undervalued stocks using financial ratios like P/E and Price/Sales [2] - The Growth Score assesses a company's financial health and future outlook based on earnings and sales projections [2] - The Momentum Score capitalizes on price trends and earnings estimate changes to identify favorable investment opportunities [3] - The VGM Score combines the three Style Scores to highlight stocks with attractive value, growth potential, and momentum [4] Zacks Rank and Style Scores Integration - The Zacks Rank utilizes earnings estimate revisions to simplify portfolio building, with 1 (Strong Buy) stocks achieving an average annual return of +25.41% since 1988 [5] - Investors are encouraged to select stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B for optimal success [6] Company Spotlight: Acuity Brands (AYI) - Acuity Brands, Inc. is a leading manufacturer of lighting fixtures and related components, focusing on energy efficiency and comfort [7] - AYI holds a 1 (Strong Buy) rating on the Zacks Rank and has a VGM Score of A, indicating strong growth potential [7] - The company is projected to achieve a year-over-year earnings growth of 5.3% for the current fiscal year, supported by a Growth Style Score of A [8] - Recent analyst revisions have increased AYI's earnings estimate for fiscal 2024 by $1.40 to $14.79 per share, with an average earnings surprise of 13.9% [8]

Core Viewpoint - Acuity Brands, Inc. (AYI) has increased its quarterly cash dividend by 15.4%, reflecting improved cash flow and effective capital allocation strategies [1][2]. Financial Performance - AYI's board approved a quarterly dividend payout of 15 cents per share, up from 13 cents per share, resulting in an annual payout of 60 cents per share [1]. - The company reported adjusted earnings of $3.72 per share for the first quarter of fiscal 2024, exceeding the Zacks Consensus Estimate by 20.4% and growing 13.1% year over year [2]. - Cash flow from operations increased by 1.6% to $190 million, driven by improved net income [3]. - For fiscal 2024, AYI expects net sales to be between $3.7 billion and $4 billion, compared to $3.95 billion in fiscal 2023 [3]. Market Performance - AYI's shares have surged 50.2% over the past three months, outperforming the Zacks Building Products - Lighting industry's growth of 44.3% [3]. - The fiscal 2024 earnings estimates for AYI have been revised upward to $14.79 per share from $14.44 per share in the past week [4]. - AYI has delivered an average trailing four-quarter earnings surprise of 13.9% [4].

Economic Overview - The U.S. economy has demonstrated significant strength in 2023, highlighted by the S&P 500 Index reaching an all-time high, with 12 out of 13 weeks showing positive performance [1] - The Federal Reserve's decision to halt interest rate hikes in July 2023 contributed to a 23.9% rally in the S&P 500 Index last year [1] - An anticipated interest rate reduction by the Fed in 2024 is expected to positively impact stock markets, as lower risk-free rates will decrease discount rates, enhancing the net present value of equity investments [1] Investment Strategy - Investors are focusing on relative price performance to identify stocks with potential for accelerated returns [2] - A stock's potential for considerable returns is primarily assessed through its earnings and valuation ratios, alongside its performance relative to peers or industry averages [3] - Stocks that outperform their respective industries or benchmarks should be prioritized for inclusion in investment portfolios [3] Stock Screening Parameters - Stocks must show a relative price change greater than 0 over the last 12 weeks, 4 weeks, and 1 week to be considered for investment [5] - Positive current-quarter estimate revisions over the last four weeks are also a criterion for selection [5] - Only stocks with a Zacks Rank of 1 (Strong Buy) are included, which have historically outperformed the S&P 500 [5] Selected Stocks - **AZZ Inc. (AZZ)**: Expected EPS growth rate of 14% over three to five years, with a market cap of $1.6 billion and a 50.7% increase in share price over the past year [6] - **Universal Technical Institute, Inc. (UTI)**: Anticipated EPS growth of 376.9% year-over-year, with shares rising 104.4% in a year [7] - **Acuity Brands, Inc. (AYI)**: Expected EPS growth of 5.3% year-over-year, with a 29.2% increase in share price over the past year [8] - **PACCAR Inc. (PCAR)**: Anticipated EPS growth of 6.6% year-over-year, with shares increasing by 40.3% in a year [8] - **The Progressive Corporation (PGR)**: Expected EPS growth of 40.3% year-over-year, with a 32.5% increase in share price over the past year [9]

Group 1 - Acuity Brands, Inc (AYI) is positioned well in the Building Products - Lighting industry, which has a Zacks Industry Rank of 12 out of over 250 industries, indicating strong overall performance [1][2] - The company has experienced positive earnings estimate revisions, with current quarter estimates increasing from $2.97 to $3.11 per share and current year estimates rising from $13.39 to $14.44 per share [2] - AYI has achieved a Zacks Rank 1 (Strong Buy), reflecting analysts' growing bullish sentiment regarding the company's short and long-term prospects [2] Group 2 - The Building Products - Lighting industry is benefiting from broad trends that are positively impacting securities across the sector, suggesting a favorable environment for investments [1] - Acuity Brands is highlighted as a strong pick within this robust industry, making it an attractive option for investors seeking opportunities in this segment [2]

Core Viewpoint - Acuity Brands (AYI) has shown strong stock performance, with a 13.9% increase over the past month and reaching a new 52-week high of $231.16, outperforming both the Zacks Construction sector and the Zacks Building Products - Lighting industry [1] Financial Performance - Acuity Brands has consistently exceeded earnings expectations, reporting an EPS of $3.72 against a consensus estimate of $3.09 in its last earnings report on January 9, 2024, and beating revenue estimates by 1.11% [2] - For the current fiscal year, the company is projected to achieve earnings of $14.91 per share on revenues of $3.85 billion, reflecting a 6.12% increase in EPS and a -2.52% decrease in revenues [2] - The next fiscal year forecasts earnings of $16.09 per share on $4.02 billion in revenues, indicating a year-over-year change of 7.91% in EPS and 4.47% in revenues [2] Valuation Metrics - Acuity Brands trades at 15.5X current fiscal year EPS estimates, below the peer industry average of 20.3X, and at 14X on a trailing cash flow basis compared to the peer group's average of 12.4X [4] - The stock has a PEG ratio of 1.55, which does not place it among the top tier of stocks from a value perspective [4] Zacks Rank - Acuity Brands holds a Zacks Rank of 1 (Strong Buy) due to favorable earnings estimate revisions from analysts, indicating strong potential for future performance [5] - The company meets the criteria for investment selection with a Zacks Rank of 1 or 2 and Style Scores of A or B, suggesting positive outlook for the coming weeks and months [5]

Group 1 - Potbelly (PBPB) has seen a 15.4% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Acuity Brands (AYI) has experienced a 10.4% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Holley (HLLY) has recorded a 4.8% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] Group 2 - Komatsu (KMTUY) has seen a 4.0% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Vertiv (VRT) has experienced a 1.2% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2]

Core Insights - Acuity Brands, Inc. (AYI) is experiencing growth driven by innovation in its diversified product portfolio and a focus on the Intelligent Spaces Group (ISG) [1][3] - The company reported first-quarter fiscal 2024 results with earnings exceeding estimates, although revenues declined year over year [1] - AYI's stock has increased by 24.6% over the past three months, outperforming the Zacks industry average of 20.9% [1] Financial Performance - For fiscal 2024, AYI expects net sales between $3.7 billion and $4 billion, compared to $3.95 billion in fiscal 2023 [1] - First-quarter fiscal 2024 net sales were reported at $934.7 million, a decrease of 6.3% from $1.11 billion in the prior-year period [7] - Earnings estimates for fiscal 2024 have risen to $13.83 per share from $13.39 per share in the past week, indicating analyst optimism [1] Growth Drivers - The company is expanding its portfolio of innovative lighting control solutions and energy-efficient products to adapt to market trends [3] - A new state-of-the-art production facility in Mexico enhances product quality and reduces environmental impact [3] - ISG's net sales grew by 13% year over year to $64.2 million, driven by business wins and the acquisition of KE2 Therm [5] Strategic Focus - AYI is concentrating on its ISG segment, which enhances the intelligence, safety, and sustainability of spaces [4] - The company is expanding geographically and through acquisitions, including the recent acquisition of KE2 Therm to enter the commercial refrigeration control market [6] - Portfolio optimization through divestitures is also part of AYI's growth strategy, having sold the Sunoptics prismatic skylights business [6] Industry Challenges - The company faces challenges from a competitive industry and economic factors such as GDP growth and energy costs [7] - Supply chain issues and rising component costs are impacting operations, alongside the need for capital investments in energy-efficient technologies [7]

Core Insights - Acuity Brands, Inc. (AYI) reported strong first-quarter fiscal 2024 results, with earnings and revenues exceeding the Zacks Consensus Estimate, marking the 15th consecutive quarter of earnings beats [1][2] Financial Performance - Adjusted earnings per share were $3.72, surpassing the consensus estimate of $3.09 by 20.4% and increasing 13.1% from $3.29 in the prior year [2] - Net sales reached $934.7 million, exceeding the consensus mark of $924.5 million by 1.1%, although this represented a 6.3% decline year-over-year due to lower volumes [2] Segment Analysis - Acuity Brands Lighting and Lighting Controls (ABL) saw net sales decline 7.5% year-over-year to $876.4 million, while the Independent Sales Network and Direct Sales Network also experienced declines of 7.2% and 8.5%, respectively [3] - Retail sales increased by 11.4% to $55.6 million, while Corporate Accounts sales fell 15.5% to $41.5 million [3] - The Original Equipment Manufacturer and other channels reported a 16.6% decline in sales to $56.7 million [3] - Adjusted operating profit for ABL increased 10.8% to $153.8 million, with an adjusted operating margin up 280 basis points to 17.5% [3] Operating Highlights - Overall adjusted operating profit rose 9.9% to $153.9 million, with an adjusted operating margin of 16.5%, up 250 basis points year-over-year [5] - Adjusted EBITDA increased by 9% to $166.7 million compared to the previous year [5] Cash Flow and Financial Position - At the end of the fiscal first quarter, cash and cash equivalents were $513.3 million, up from $397.9 million at the end of fiscal 2023 [6] - Long-term debt remained stable at $495.7 million [6] - Cash provided by operating activities totaled $190 million, an increase from $186.6 million in the prior year, while free cash flow rose 4.2% to $175.4 million [6] - The company repurchased nearly 0.3 million shares for $50 million during the quarter [6] Fiscal 2024 Outlook - For fiscal 2024, AYI expects net sales to be in the range of $3.7 billion to $4 billion, compared to $3.95 billion reported in fiscal 2023 [7] - Adjusted earnings per share are projected to be between $13 and $14.50, compared to $14.05 in fiscal 2023 [8]

Financial Data and Key Metrics Changes - The company reported net sales of $935 million for Q1 2024, a decrease of $63 million or 6% compared to the prior year, primarily due to lower sales in the ABL business [16] - Adjusted operating profit increased by $14 million year-over-year, with an adjusted operating profit margin of 16.5%, an increase of approximately 250 basis points from the prior year [15][16] - Adjusted diluted earnings per share rose by $0.43 year-over-year to $3.72, reflecting higher net income and lower shares outstanding due to share repurchases [15][16] Business Line Data and Key Metrics Changes - In the ABL segment, net sales were $876 million, a decrease of around 7% compared to the prior year, while adjusted operating profit increased by 11% to $154 million, with an adjusted operating profit margin of 17.5%, a 280 basis point improvement [17] - The ISG segment reported net sales of $64 million, an increase of 13%, with adjusted operating profit of $10 million [16][17] Market Data and Key Metrics Changes - The company experienced a year-over-year and sequential improvement in order rates, indicating a return to typical lead times and a normalization of order and shipment rates [14][28] - The company noted that the retail channel showed strong performance, partially offsetting declines in other channels [17] Company Strategy and Development Direction - The company is focused on increasing product vitality, elevating service levels, and using technology to improve product differentiation and operational efficiency [5][6] - The strategy includes geographic expansion and increasing control in built spaces, particularly through the intelligent spaces business [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the current order rates and performance, indicating a stable outlook without expecting significant changes in the macro environment [31][66] - The company plans to continue focusing on margin and cash flow in the Lighting and Lighting Controls business while expanding geographically in the Spaces Group [14][19] Other Important Information - The company generated $190 million in cash flow from operations, an increase of $3 million over the prior year, and allocated approximately $50 million to share repurchases [18] - The company opened a new state-of-the-art production facility in Mexico, which is expected to enhance operational efficiency and reduce environmental impact [9][10] Q&A Session Summary Question: Can you provide additional detail on gross margin performance? - Management indicated that the strong gross margin was a result of strategic pricing, cost management, and product vitality efforts [21][22] Question: How much of the order rate improvement is due to backlog depletion? - Management clarified that order rates are up modestly year-over-year and sequentially, indicating a normalization of lead times and consistent performance [27][28] Question: What is the outlook for large projects in the market? - Management noted that while there is some discussion about large projects, they do not foresee significant weakness and believe the market is stabilizing [45][46] Question: What drove the unexpected strength in margins? - Management attributed the strong margins to a higher mix of control products and effective execution of their business strategy [61][62] Question: How does the company view the impact of the upcoming election on projects? - Management does not anticipate significant impacts from the election on project activity, viewing the current market as stable [66]

Financial Performance - Q1 2024 - Acuity Brands' net sales decreased by 6% to $935 million compared to $998 million in Q1 2023[7, 29] - Adjusted diluted earnings per share increased by 13% to $3.72 from $3.29 in Q1 2023[7] - Adjusted operating profit increased by 10% year-over-year, reaching $154 million compared to $140 million in the same quarter last year[7, 31] - The adjusted operating profit margin expanded by 250 basis points[7] Segment Performance - ABL (Acuity Brands Lighting and Lighting Controls) - ABL net sales decreased by 7% to $876 million compared to $947 million in Q1 2023[10] - ABL adjusted operating profit increased by 11% to $154 million from $139 million in Q1 2023[10] - ABL adjusted operating profit margin increased by 280 basis points to 17.5% from 14.7% in Q1 2023[10] Segment Performance - ISG (Intelligent Spaces Group) - ISG net sales increased by 13% to $64 million compared to $57 million in Q1 2023[25] - ISG adjusted operating profit margin was 16%[25, 36] Fiscal Year 2024 Outlook - The company anticipates net sales to be in the range of $3.7 billion to $4.0 billion[15] - Adjusted diluted EPS is projected to be between $13.00 and $14.50[15]