What happened

Shares of Acuity Brands (AYI 0.17%) fell hard on Tuesday, closing the session down by 11%.

The lighting systems and intelligent spaces company fell following the delivery of its fiscal 2023 second-quarter results. While the quarter looked decent on the surface, the top-line figure wasn't high enough to please analysts. In addition, there appeared to be some fear in the market that the construction industry may slow down in the quarters ahead.

So what

In its fiscal second quarter, which ended Feb. 28, Acuity grew revenue by 3.8% to $943.6 million, missing the consensus expectation by $14.9 million, while adjusted (non-GAAP) earnings per share came in at $3.06, up 19.1%, which actually beat expectations by a significant $0.33.

After the report came out, the stock initially rose before falling hard along with the rest of the industrial sector. The overall sector seemed to sell off in the wake of the release of the February Job Openings and Labor Turnover Survey (JOLTS), which came in much lower than expected, as well as a report from the CoStar Group showing a massive decline in purchases of apartment buildings in the first quarter.

Those indicators seemed to portend a potential downturn in the construction sector later this year, particularly if the U.S. enters a recession due to the Fed's rate hikes or if building activity is slowed by the ongoing regional bank crisis. Those factors, in combination with Acuity's light top-line numbers, led investors to bid down the stock despite the company's solid profits last quarter.

Now what

After Tuesday's sell-off, Acuity now trades at just under 15 times earnings, which is not that expensive a valuation. Moreover, the company maintained its guidance for the year of sales between $4.1 billion and $4.3 billion, which would amount to about a 4.7% increase, along with earnings per share between $13 and $14.50, which would be an increase of 7.2% at the midpoint.

Management projects low-to-mid-single-digit percentage revenue growth in its lighting solutions segment, along with mid-teens growth in its Intelligent Spaces Group (ISG), which comprises control systems to help buildings operate more efficiently, and which made up 6.1% of revenues last quarter.

That's no doubt a big deceleration from last year's mid-teens growth, but at this valuation, and with the company profitable enough to repurchase stock, Acuity Brands looks rather cheap now. As long as we don't go into a prolonged recession, the stock could be a buy on further weakness due to macroeconomic fears.