S&P 500 gains to extend record run, set for positive week
Investing.com - William Blair maintained its outperform rating on Acuity Brands (NYSE:AYI), a $9.4 billion market cap lighting solutions company, following the company’s third-quarter performance. According to InvestingPro data, the stock has delivered an impressive 20% return over the past year, and three analysts have recently revised their earnings estimates upward for the upcoming period.
The research firm expressed confidence that Acuity’s 50% gross margins are sustainable, despite modeling conservatively due to tariff uncertainty. Current gross margins stand at 46.94%, according to InvestingPro data, which shows the company maintains strong profitability despite challenges. Acuity maintained its fiscal 2025 guidance despite the third-quarter beat, as the fourth quarter will experience pull-forward giveback and lower gross margins as tariffs are passed on dollar for dollar.
William Blair adjusted its fourth-quarter sales estimate downward by approximately 150 basis points to account for lighter demand following pricing actions. The firm expects fourth-quarter gross margin to decline 200 basis points sequentially as tariff costs begin to impact results, though it anticipates some improvement over time due to QSC, new products, and productivity improvements.
The Intelligent Spaces Group (AIS) segment’s margin performance exceeded expectations, with QSC margins progressing faster than anticipated. The core AIS business also demonstrated strong top-line growth and margins, though the firm expects some margin softening as tariff impacts and growth-oriented investments are implemented.
William Blair’s thesis centers on management structurally improving operations, gross margin having upside potential, and mix shifting toward higher-growth and higher-margin building controls. The firm also expressed confidence that Acuity will manage tariffs better than peers to gain market share and protect dollar profits. With analyst targets ranging from $271 to $380 and an overall "GOOD" financial health score from InvestingPro, which offers 8 additional key insights about AYI’s performance and valuation in its comprehensive Pro Research Report.
In other recent news, Acuity Brands reported strong financial results for the third quarter of fiscal year 2025, with earnings per share reaching $5.12, surpassing the forecasted $4.3. The company also reported revenues of $1.2 billion, exceeding expectations of $1.15 billion, marking a 22% year-over-year increase in net sales. Acuity Brands’ adjusted operating profit rose by 33% to $222 million, driven by new product launches and strategic acquisitions. The company’s management expressed confidence in handling potential tariff impacts, emphasizing a robust supply chain and strategic pricing actions. The acquisition of QSC has been well integrated, contributing to the company’s growth with accelerated revenue and expanded margins. Acuity Brands continues to invest in growth opportunities and expects normalized performance in the upcoming quarters. The company has taken aggressive actions to manage outcomes amid market uncertainties, focusing on product vitality and productivity. The company’s strategic initiatives and operational resilience have been positively received by investors, as reflected in the recent stock performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.