Acuity, Inc. (AYI) Earnings & Analysis

Latest quarter

Acuity reported fourth-quarter revenue of $1.2 billion, below the consensus estimate of $1.3 billion. Adjusted earnings per share of $5.77 exceeded the consensus estimate of $5.53.

CFO Karen Holcom said sales rose $35 million, or 3%, from a year earlier as growth in Acuity Intelligent Spaces (AIS) offset a decline at Acuity Brands Lighting (ABL). AIS sales increased 17% to $298 million, while ABL sales fell less than 1% to $959 million. Holcom said the lighting comparison included a prior-year period in which Acuity was working through an elevated backlog following orders placed ahead of price increases.

Acuity reported gross margin of 53.8%, compared with 48.9% a year earlier, and operating margin of 18.2%, compared with 14.9%. Diluted earnings per share rose to $5.63 from $3.61. Holcom said the quarter included tariff refunds and special charges in both businesses, which were adjusted out of the company’s adjusted results.

The company reported quarterly free cash flow of $286.2 million, up from $177.7 million a year earlier. Holcom said Acuity repaid $200 million of debt during fiscal 2026 and another $200 million after the year ended.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Asked about lighting demand, CEO Neil Ashe said the order rate and business climate at ABL had firmed and he expected that to continue into fiscal 2027. He said, “We do expect the market to be flat to down low singles.” Acuity expects to gain share and expand into new verticals, including data centers, he said. Ashe also said the company had introduced a luminaire designed for data centers.

On pricing, Ashe said ABL prices products according to their value rather than applying a markup to changing inflation. He said the company was seeing inflation in areas including steel and freight and was addressing it through purchasing, product development and manufacturing productivity. A price increase announced in September takes effect in December, he said.

Analysts asked about margin improvement and rising memory costs at AIS. Holcom said the company’s first priority was to secure supply for customers, followed by recovering the added cost in dollars and rebuilding margin over time. Ashe estimated the memory increases would have about a 200 basis points gross-margin impact over the year and said the effect would probably begin late in the first quarter and continue into the second. He expects AIS operating margins to be flat to slightly higher in fiscal 2027.

At ABL, Ashe said structural changes, rather than sales growth, were the primary driver of gross-margin improvement. Discussing productivity actions, he said Acuity had closed one facility, consolidated into another and eliminated some smaller brands and product lines.

Ashe said Acuity was investing in technology and using AI to reevaluate processes and shorten product-development cycles. In AIS, he said the company was developing applications intended to improve outcomes for customers in their spaces.

Guidance

Following its agreement to acquire Parameter Technologies, Acuity said it expects the deal to add to fiscal 2027 adjusted diluted earnings per share. The company said Parameter expects approximately $100 million in calendar 2027 sales, growth of more than 30 percent year over year, and EBITDA margins of approximately 40 percent.