Wells Fargo Sees The Light For Atkore, Hubbell, Acuity

The electric era has given rise to trendy tech start-ups and widely hyped unicorns. But legacy lighting stocks are keeping pace and staying relevant, according to Wells Fargo. 

The Ratings

• Analyst Richard Kwas maintained Outperform ratings on:
• Atkore International Group Inc ATKR with a $33 price target;
• Hubbell Incorporated HUBB with a $130 target; and
• Acuity Brands, Inc. AYI with a target cut from $161 to $159.

The Thesis 

Wells Fargo sees stronger fundamentals in the lighting sector than the market is giving credit for, Kwas said in a Tuesday note. 

The analyst said he's seeing peaked inventory, accelerated bid and quote activity, strong backlogs, stable remodeling and improved construction sentiment.

“Lighting demand was slightly better than last check and price realization is happening and should be more relevant to revenues as [2019] evolves,” Kwas said. “General electrical demand moderated a bit vs. last check but was largely stable, in our view.”

Both commercial and residential projects generated heartening results for the portfolio.

Channel checks indicate a recent acceleration in Acuity's business activity, although pricing improvements have not manifested through all of the firm’s backlogged project sales, the analyst said. 

“The roll through of project business through [the first half] likely will dampen price realization on stock and flow and discretionary, non-spec volume,” Kwas said.

Wells Fargo forecast gross margin decreases despite volume-driven revenue upside.

Price Action

Hubbell shares were up 0.33 percent at $99.67 at the time of publication Wednesday, while Atkore was up 2.12 percent at $20.26 and Acuity was 0.7 percent higher at $115.76. 

Related Links:

JMP On Acuity Brands: 'Reasonable Valuation Based On Reasonable Expectations'

Acuity Brands Downgraded As Bull Thesis Fails To Manifest

Morgan Stanley Starts Coverage Of Electrical, Multi-Industry Stocks Threatened By Tech Advances

Photo courtesy of Acuity Brands.