NEW DIRECTIONAL CALL PLAYS
Acuity Brands, Inc. - AYI - close: 154.09 change: +2.22
Stop Loss: 149.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 365 thousand
Entry on January -- at $---.--
Listed on January 26, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below
Why We Like It:
AYI is part of the technology sector. The company has managed to deliver double-digit sales and earnings growth in six out of the last seven quarters.
Who are they? "Acuity Brands, Inc. is a North American market leader and one of the world's leading providers of lighting solutions for both indoor and outdoor applications. With fiscal year 2014 net sales of $2.4 billion, Acuity Brands employs approximately 7,000 associates and is headquartered in Atlanta, Georgia with operations throughout North America, and in Europe and Asia. The Company's lighting solutions are sold under various brands." (source: company press release)
The last couple of earnings reports have been healthy. Back in October AYI beat Wall Street's estimates on both the top and bottom line with revenues rising +15.3%. Their most recent report was January 9, 2015. Earnings rose +38% from a year ago to $1.32 a share, which was above expectations. Revenues rose +12.7% to $647.4 million, also above expectations.
AYI's President Vernon Nagel commented on the quarter saying, "We were extremely pleased with our record fiscal 2015 first quarter results. Gross profit margin of 42.2 percent increased 90 basis points over prior year's first quarter, while adjusted operating profit margin of 14.9 percent increased 230 basis points over last year's first quarter adjusted operating profit margin. Our variable contribution margin, i.e., the incremental adjusted operating profit as a percentage of the increase in net sales, was over 33 percent. We believe our record first quarter results reflect our ability to provide customers truly differentiated value from our industry-leading portfolio of innovative lighting and control solutions along with superior service."
AYI also discussed their outlook and Mr. Nagel said, "We remain very bullish about our prospects for continued future profitable growth. Third-party forecasts as well as key leading indicators suggest that the growth rate for the North American lighting market, which includes renovation and retrofit activity, will be in the mid-to-upper single digit range for fiscal 2015 with expectations that overall demand in our end markets will continue to experience solid growth over the next several years. Our order rates through the month of December reflect this favorable trend. Further, we expect to continue to outperform the growth rates of the markets we serve due to benefits from growing renovation and tenant improvement projects, further expansion in underpenetrated geographies and channels, and growth from the introduction of new products and lighting solutions."
At least two analysts have already upgraded their price targets on AYI following the January earnings report.
Technically shares have spent the last couple of weeks digesting gains after its big, post-earnings pop to new highs. Now the stock looks poised to begin its next leg higher. There is short-term resistance near the $155.50-156.00 area. Tonight I'm suggesting a trigger to buy calls at $156.05.
Trigger @ $156.05
- Suggested Positions -
Buy the MAR $160 CALL (AYI150320C160) current ask $3.20
Option Format: symbol-year-month-day-call-strike