Comparing AZZ (AZZ) and Acuity Brands (AYI)

AZZ (NYSE: AZZ) and Acuity Brands (NYSE:AYI) are both industrial products companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, earnings, dividends, profitability, valuation and risk.

Risk & Volatility

AZZ has a beta of 1.26, suggesting that its share price is 26% more volatile than the S&P 500. Comparatively, Acuity Brands has a beta of 1.34, suggesting that its share price is 34% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and price targets for AZZ and Acuity Brands, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AZZ 0 1 0 0 2.00
Acuity Brands 1 7 5 0 2.31

AZZ currently has a consensus price target of $52.00, indicating a potential upside of 25.00%. Acuity Brands has a consensus price target of $177.82, indicating a potential upside of 49.75%. Given Acuity Brands’ stronger consensus rating and higher possible upside, analysts clearly believe Acuity Brands is more favorable than AZZ.

Valuation & Earnings

This table compares AZZ and Acuity Brands’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
AZZ $810.43 million 1.34 $61.26 million $1.35 30.81
Acuity Brands $3.51 billion 1.43 $321.70 million $7.96 14.92

Acuity Brands has higher revenue and earnings than AZZ. Acuity Brands is trading at a lower price-to-earnings ratio than AZZ, indicating that it is currently the more affordable of the two stocks.

Dividends

AZZ pays an annual dividend of $0.68 per share and has a dividend yield of 1.6%. Acuity Brands pays an annual dividend of $0.52 per share and has a dividend yield of 0.4%. AZZ pays out 50.4% of its earnings in the form of a dividend. Acuity Brands pays out 6.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. AZZ has raised its dividend for 4 consecutive years. AZZ is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

96.8% of AZZ shares are held by institutional investors. 0.0% of AZZ shares are held by insiders. Comparatively, 1.5% of Acuity Brands shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares AZZ and Acuity Brands’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AZZ 5.56% 4.63% 2.50%
Acuity Brands 9.68% 20.56% 11.89%

Summary

Acuity Brands beats AZZ on 13 of the 17 factors compared between the two stocks.

AZZ Company Profile

AZZ Inc. provides galvanizing services, welding solutions, specialty electrical equipment, and highly engineered services to the power generation, transmission, distribution, refining, and industrial markets. The company operates through two segments, Energy and Galvanizing Services. The Energy segment provides specialized products and services designed to support industrial, nuclear, and electrical applications. This segment offers custom switchgear, electrical enclosures, medium and high voltage bus ducts, explosion proof and hazardous duty lighting, nuclear safety-related equipment, and tubular products to multi-national companies, and small independent companies. This segment sells its products through manufacturers' representatives, distributors, agents, and internal sales force. The Galvanizing Services segment offers hot dip galvanizing services to the steel fabrication industry. This segment serves fabricators or manufacturers that provide services to the electrical and telecommunications, bridge and highway, petrochemical, and general industrial markets, as well as original equipment manufacturers. As of February 28, 2017, the company operated 41 galvanizing plants located in Alabama, Arkansas, Arizona, Colorado, Indiana, Illinois, Louisiana, Kentucky, Minnesota, Mississippi, Missouri, Nebraska, Nevada, Ohio, Oklahoma, Tennessee, Texas, Virginia, and West Virginia in the United States; and Ontario, Quebec, and Nova Scotia, Canada. AZZ incorporated was founded in 1956 and is based in Fort Worth, Texas.

Acuity Brands Company Profile

Acuity Brands, Inc. provides lighting and building management solutions and services for commercial, institutional, industrial, infrastructure, and residential applications in North America and internationally. The company offers lighting and controls products and solutions, such as recessed, surface, and suspended lighting; down, decorative, emergency and exit, track, day, special-use, street and roadway, parking garage, landscape, and underwater lighting; area pedestrian, flood, and decorative site lighting; occupancy sensors; photo controls; relay panels; architectural dimming panels; and integrated lighting controls systems. It also provides modular wiring products, light emitting diode drivers, glass products, and inverters; and services across applications that primarily relate to monitoring and controlling lighting systems through network technologies and the commissioning of control systems. The company markets its products under the Lithonia Lighting, Holophane, Peerless, Gotham, Mark Architectural Lighting, Winona Lighting, Juno, Indy, Aculux, Healthcare Lighting, Hydrel, American Electric Lighting, Carandini, Antique Street Lamps, Sunoptics, RELOC Wiring Solutions, eldoLED, Distech Controls, Acuity Controls, and Atrius brand names. It serves electrical distributors, retail home improvement centers, electric utilities, lighting showrooms, national accounts, government entities and municipalities, original equipment manufacturers, value-added resellers, utility distributors, system integrators, developers, and energy service companies, as well as new construction, renovation, and maintenance and repair markets. The company sells its products through independent sales agents, electrical distributors, system integrators, and sales representatives, as well as through a network of distribution centers, regional warehouses, and commercial warehouses. Acuity Brands, Inc. was founded in 2001 and is headquartered in Atlanta, Georgia.

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