Goldman Sachs Comments on Acuity Brands' (AYI) Q3

Goldman Sachs maintained a Neutral rating on Acuity Brands (NYSE: AYI) and reduced its price target to $128.00 (from $135.00). The change follows Q3 results. Analyst Brian Lee sees risk/reward as balanced.

"Acuity’s 3QFY14 (May) results missed our estimates as expectations of a volume recovery following a weather-impacted 2Q failed to materialize. 3QFY14 revenue/non-GAAP EPS of $604mn/$1.00 was below our $625mn/ $1.16 as volume growth of +13% yoy came in below our +17% estimate. The EPS miss was driven primarily by lower revenue, with price/mix and forex a combined 1.5% headwind, while higher SG&A led to an operating margin of 11.9%, 170bp below our estimate. We lower our FY2014E/15E/
16E EPS by 7%/7%/2% to $3.97/$5.06/$6.16 on lower revenue and higher opex, which reduces our 12m price target by 5% to $128 (from $135 prior)," said analyst Brian Lee.

"While Acuity highlighted an expanding TAM for networked lighting solutions – specifically a $1bn opportunity for next generation drivers – we believe a more robust non-resi recovery is required for the stock to move higher in the near term, which may still be several quarters out given a still-tepid recovery and lighting’s typical 9-month lag. With Acuity trading at 23X CY2015E EPS, we see risk/reward as more balanced at current levels," he said.

For an analyst ratings summary and ratings history on Acuity Brands click here. For more ratings news on Acuity Brands click here.

Shares of Acuity Brands closed at $117.62 yesterday.

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