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Why Shares of Acuity Brands Tumbled Today

By Timothy Green - Oct 2, 2019 at 12:24PM

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Global trade tensions are taking a toll on the lighting company.

What happened

Shares of Acuity Brands (AYI 0.02%) slumped on Wednesday following a lackluster quarterly report from the lighting and building management solutions provider. Acuity's fourth-quarter results missed analyst expectations across the board, and the company's outlook was heavy on caution due to economic uncertainties. The stock was down about 12% at 11:45 p.m. EDT.

So what

Acuity reported fourth-quarter revenue of $938.1 million, down 11.6% year over year and about $92 million below the average analyst estimate. Sales volume dropped 16%, while the company benefited from a favorable change in pricing and product mix.

A declining chart.

Image source: Getty Images.

Non-GAAP (adjusted) earnings per share came in at $2.75, up from $2.68 in the prior-year period but $0.07 lower than analysts were expecting. A higher gross margin and lower operating costs helped offset the steep decline in sales.

"While various factors, including some that were anticipated, contributed to the decline in fourth quarter net sales, we were pleased to achieve meaningful year-over-year improvement in both adjusted gross profit margin and adjusted operating profit margin," said Acuity CEO Vernon Nagel in prepared remarks included in the earnings release.

Now what

Acuity expects the weak sales trend to continue into fiscal 2020. The company is cautious about the market conditions in the lighting industry due to global trade issues, tariffs, and general economic uncertainty. "We expect market demand for lighting products to remain sluggish until there is more clarity regarding these global trade issues," said Nagel.

The company expects a mid- to high single-digit-percentage decline in sales in the first quarter, partly driven by customers pulling forward orders ahead of price increases. However, Nagel noted that this forecast comes with plenty of uncertainty: "While we believe prior year's pull forward of orders contributed significantly to last year's first quarter net sales growth rate of 11 percent, we are unable to specifically quantify its impact. Therefore, it is not possible to precisely know how this will impact this year's first quarter results compared with the year-ago period."

Including Wednesday's plunge, Acuity stock is now down about 59% from the multiyear high it reached in 2016.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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