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Tickers in this Article: AYI, CBE, NYSE:HUB.B, NYSE:HUB.A, PHG
Acuity Brands (NYSE:AYI) has experienced a rough couple of years as demand for its lighting-fixture products and related services have fallen in along with commercial and residential construction activity. A recent stock rally has proven beneficial for current shareholders, but recent operating trends may leave prospective investors on the sidelines for the time being. IN PICTURES: Learn To Invest In 10 Steps

Second-Quarter Highlights
Sales fell a slight 0.7% to $383.5 million as 3.5 percentage points of top-line growth due to acquisitions and a 1% boost from positive foreign currency translations were more than offset by negative organic growth trends. Management estimated that sales fell 5% organically on lower pricing, volumes and a mix to lower-margin products during the quarter.

Acuity took $5.4 million in special charges "for streamlining activities" - as its operations have struggled due to lower demand for commercial and residential lighting installations across the country. This was slightly higher than the $4.6 million taken during last year's quarter. Additionally, Acuity took a $10.5 million hit related to a loss on the early repayment of debt. However, overall debt increased as the company replaced $200 million in notes with $350 million in notes that are due in December 2019.

Reported net income fell 45.9% to $7.8 million, or 17 cents per diluted share. However, excluding the charges above net income would have been 40 cents per diluted share, or a penny below last year's 41 cents per diluted share. On an operating basis, the bottom line came in ahead of analyst projections.

Outlook
Acuity sees continued struggles for all of 2010 and currently expects sales to decline in the mid-teens. Analysts currently project full-year earnings of $2.14 per share, which would represent approximately 5% year-over-year growth. Lighting rivals, including Cooper Industries (NYSE:CBE) and Hubbell (NYSE:HUB.B) (NYSE:HUB.A), are projected to experience slight increases in sales and earnings during their current fiscal years but are also waiting for industry trends to improve.

Bottom Line
At the current quotation, the shares of Acuity are currently trading at a forward P/E multiple of about 16.5. Improved stock market sentiment has sent the stock up almost 17% so far in 2010 and has put the valuation ahead much faster than operating performance that has yet to show tangible signs of a recovery. This coupled with a big jump in indebtedness, with long-term debt now approximately 33% of total capitalization, warrants a wait-and-see approach to investing in Acuity. However, longer-term, Acuity and other industry players should see a benefit as consumers and businesses switch to LED lighting technology from traditional, less energy efficient lightbulbs. Royal Philips Electronics (NYSE:PHG) is a major original manufacturer of LED lighting products. (For more stock analysis, take a look at America's Top Dividend-Paying Stocks.)

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