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Why Acuity Brands Stock Dropped 10% Today

By Howard Smith – Updated Oct 8, 2020 at 5:25PM

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Investors were disappointed with quarterly earnings and the outlook after a recent run in the share price.

What happened

Shares of Acuity Brands (AYI 0.22%) had been rising over the past two weeks, but today's earnings report from the company left investors wanting more, and the stock sold off to the tune of 10% after fiscal fourth-quarter earnings were released. 

So what

After more than a 15% gain leading up to its earnings release over the past two weeks, shares gave back more than 10% today when the company said sales for the quarter ending Aug. 31, 2020, dropped 5% versus the prior-year period. But it may have been the outlook that also had investors somewhat spooked. 

city night lights with lighting solutions digitally enhanced

Image source: Getty Images.

Though the company's fiscal year was impacted by the pandemic, Acuity reported an increase in free cash flow as well as cash and equivalents for the year. 

Now what 

During the quarter, the company also spent $69 million to repurchase shares, and maintained its dividend. But after expectations drove up shares leading up to the earnings release, investors took some profits when the company remained uncertain in its outlook. 

The provider of lighting and building management solutions doesn't see a sharp upturn coming as businesses still struggle to regain footing after pandemic-related restrictions. The company said in its earnings release that "we expect weakness in nonresidential building activity based on current construction indicators." 

But today's drop can likely be attributed more to the recent share price run-up. It's a positive sign that Acuity could increase its cash position as it generated more free cash flow this quarter. It said it believes it will be able to leverage its portfolio in lighting and smart building solutions going into its next fiscal year. 

Howard Smith 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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