Acuity Continues To Execute, But Weaker Non-Resi Trends Seem To Be Weighing On Shares

One of the more frustrating investment situations to be in is to see a company executing a little better than expected, but see the shares drift lower anyway. Such is the case with Acuity Brands (NYSE:AYI), where two decent quarters (relative to sell-side expectations) and inline guidance for FY’23 hasn’t been enough to maintain investor enthusiasm. Down about 5% since my last update on the company, Acuity has modestly outperformed the S&P 500 but underperformed the broader industrial space, including other non-resi-skewed comps like Allegion (ALLE), Hubbell (HUBB), Johnson Controls (JCI), and Otis (OTIS).

I’ve written in the past about the risk of “boredom” with this stock; it’s not well-covered and the long-term growth potential in the core business (lighting) isn’t very exciting. Still, while recognizing risks like increased competition from overseas lighting manufacturers and overpaying for growth-oriented M&A (for the Intelligent Spaces Group, or ISG), not to mention my weaker-than-the-Street outlook for non-resi activity in 2023/24, the share price does look too low to me and this may be a name for value-driven investors to consider.

 

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Acuity Continues To Execute, But Weaker Non-Resi Trends Seem To Be Weighing On Shares