With the company's earnings report little more than a week away, Acuity is trading tightly near record highs. The building technology company is the IBD Stock Of The Day.
Atlanta-based Acuity is the No. 1 stock in IBD's miscellaneous construction products industry group. It has a Composite Rating of 96, and its Earnings Per Share Rating of 93 is among the group's best.
The company operates two segments. The Acuity Brands Lighting division makes lighting systems and controls. Acuity's Intelligent Spaces business makes energy management, automation, refrigeration controls, conferencing products and other building systems.
The lighting business grew at a modest 2.7% rate in the May-ended quarter, as the company moved away from higher-tariff sources, raised some prices and took other steps to counter tariffs. The moves led to accelerated orders in the May quarter. Acuity booked $29.7 million in special charges for the elimination of some lighting brands and reorganization costs.
But the Intelligent Spaces business ramped up sales 248.9% year over year. The division raised prices, largely to counter tariffs, and it also saw order accelerations ahead of those price hikes, Chief Financial Officer Karen Holcom told analysts in the earnings call.
Acuity Margins And Sales
While the "tariff math" impacts margins, Holcom said the businesses are performing well in their own right. She adds that "the bottom line is the underlying businesses are performing really well, and we've done a lot of things to improve the margins to where they are."
In its most recent report on Acuity stock, dated Sept. 2, Wells Fargo upgraded Acuity to overweight from equal weight and also raised its price target to 380 from 320. Analysts said Acuity's pricing power should help the company manage inflationary pressures and offset cost headwinds, TheFly.com reported.
Acuity is due to report fiscal fourth-quarter results on Oct. 1 at 6 a.m. ET.
Analysts polled by FactSet expect earnings of $4.78 a share, for a year-over-year increase of 11.2%. Sales are expected to climb 19% to $1.228 billion. Meanwhile, estimates have trended slightly higher in the past month.
Analysts see sales in the lighting segment climbing 4% to $963 million from the previous quarter, according to FactSet. Wall Street also predicts an easing in Intelligent Spaces by 2% to $258 million vs. the fiscal third quarter.
Acuity Stock Analysis
Acuity stock is extended from a cup-with-handle buy point at 310.09. Up 8% from a July 28 breakout, shares also are meeting resistance as they try for all-time highs.
The stock, however, has been trading tightly and formed a three-weeks-tight pattern with a 348.62 buy point. Shares have found support at the 21-day exponential moving average since August.
Acuity stock has a 21-day average true range, or ATR, of 2.54%. The average true range, available on IBD's MarketSurge, gauges the characteristic breadth of a stock's behavior. Further, stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should avoid being concentrated in higher-ATR names.
