Goldman Adds Acuity Brands To Focus List, Cites 'Strongest Competitive Position Among Lighting Peers'

Goldman Sachs has added Acuity Brands, Inc. AYI to its focus list. It sees the company has the strongest competitive position among lighting peers as the sector shifts to low-carbon LED-based lighting technologies.

Acuity Brands is the "largest global provider of advanced LED lighting and control system," according to the report, and currently enjoys a strong position in the North American market. The company has minimal exposure to legacy assets and is immune to pricing pressures.

"With 55 percent of the company's net sales already LED based, it has less exposure to legacy assets than its peers, and with its focus on downstream it does not face the pricing pressures that affect the commoditized upstream of the LED value chain," analyst Derek Bingham wrote in a note.

Related Link: Roth Capital Initiates Coverage On Acuity Brands At Neutral, Announces $275.00 PT

Bingham noted that the company would maintain its sector-leading margins and returns due to its leadership in intelligent lighting and lighting-as-a-service solutions, which is already 10 percent of LED sales.

"Acuity's cash return on capital invested (CROCI) (2016–18E average of 23 percent) ranks in the 94th percentile among global Multi-Industry peers and is expected by our analysts to continue to rise," Bingham continued.

That said, the company does not meet Goldman's governance and risk management screen given lack of detailed reporting on stakeholder engagement. However, the analyst views "the company's core business activity [...] as an important offsetting consideration."

Shares of Acuity Brands closed Thursday's regular trading session at $270.80.

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