Acuity Brands Downgraded As Bull Thesis Fails To Manifest

As such, the firm downgraded shares of Acuity Brands from Outperform to Neutral and lowered its price target from $212 to $178.

Analyst Timothy Wojs noted that the firm's fourth-quarter Lighting Survey of 22 lighting agents/distributors showed that overall volume rose 3 percent year over year, slowing from the 4-percent growth in the previous quarter.

"Growth particularly slowed in commercial and institutional verticals, with outdoor remaining more stable and controls remaining an area of relative strength," the analyst said.

Wojs also noted that all months within the fiscal year fourth quarter saw a net slowdown in demand, with the demand cadence not improving in September. Stung by low-cost competition and increased pricing aggressiveness by large OEMs, the analyst noted that overall pricing fell 5 percent, 150 basis point deterioration from the last survey.

The firm also said the volume and pricing outlook for 2017 were lowered, reflecting the continuation of recent trends through the rest of the year.

"While the timing's not ideal (AYI -9% vs. S&P over the past month), our checks point to additional market deterioration, lowering our conviction in meaningful growth acceleration and estimate upside in F2018, which we think keeps the stock range bound," the firm added.

Keeping in mind the recent stock underperformance/multiple compression, Acuity Brands' positioning and optionality around tier 3/4 solutions, the firm thinks an improving market is a prerequisite to drive multiple re-expansion. Until then, the firm said the stock could remain stuck in the recent trading range.

At time of publication, shares were trading down 7.34 percent at $155.51.