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Why Shares of Acuity Brands Jumped 12% in April

By Scott Levine - May 10, 2021 at 2:50PM

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A strong second-quarter earnings report, as well as enthusiasm from Wall Street, lit up investors' excitement last month.

What happened

Soaring 34% in March, shares of Acuity Brands (AYI 0.02%), an industry-leading manufacturer of lighting products and solutions, extended their rise last month and gained 12%, according to data provided by S&P Global Market Intelligence.

Besides Acuity's strong second-quarter 2021 earnings report -- one in which it beat analysts' bottom-line expectation -- a wave of bullish sentiment from Wall Street motivated investors to pick up shares.

A man points to a rising red line graph on a wall.

Image source: Getty Images.

So what

Meeting analysts' revenue expectations, Acuity reported $777 million on the top line for the second quarter; however, it smashed earnings estimates to the delight of shareholders. Whereas analysts expected the company to report adjusted EPS of $1.73, the company reported $2.12, representing a 15% increase over the $1.84 in adjusted EPS that the company reported during the same period in 2020. And for investors skeptical of the company's earnings beat on an adjusted basis, a look at the GAAP results proves just as impressive: second-quarter EPS was $1.74, a 21% year-over-year increase.

After Acuity's earnings presentation on March 31, several analysts, inspired by the results, espoused bullish perspectives on the company's stock. On April 1, for example, Baird upgraded the stock to outperform from neutral, hiking its price target to $190 from $155, according to Thefly.com. The upwardly revised price target represents 31% upside to the stock, which was trading at about $145 at the time of Baird's new take on the stock.

Similarly, Cowen, maintaining an outperform rating on the stock, raised its price target to $181 from $133, while Credit Suisse raised its price target to $186 from $152. The most optimistic outlook on the stock, however, came on April 19 when Oppenheimer raised its price target to $205 from $190.

Now what

Rising steadily in March and April, Acuity's stock shows little sign of slowing down; shares are up nearly 4% so far in May. With infrastructure spending high on President Biden's agenda, it seems logical that investors are looking to pick up shares of a leading lighting products and solutions provider. Beyond the infrastructure bill, management's comments on the second-quarter conference call suggest that investors can take solace in improving industry trends. According to CEO Neil Ashe, "As we look ahead, we see improvements in the end markets we serve, and we are cautiously optimistic about the outlook for the remainder of fiscal year '21."

Scott Levine 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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Acuity Brands, Inc. Stock Quote
Acuity Brands, Inc.
AYI
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