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Tickers in this Article: AYI, CBE, ZEP, NYSE:HUB-A, NYSE:HUB-B
Lighting fixture market leader Acuity Brands (NYSE:AYI) kicked off its fiscal year with a thud, as sales continued to struggle along with the industrial construction markets it serves. Its residential focus is less of a concern, given that it accounts for a small proportion of sales, but the entire industry continues to face tepid near-term trends. The longer-term outlook is much more compelling, which means keeping Acuity close on stock watch lists. (Some companies are severely hurt in a recession, while other prosper. For more information read Industries That Thrive On Recession and 4 Characteristics Of Recession-Proof Companies.)

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Recent Results
First-quarter sales fell 13% to $391.7 million on a decline in shipment volumes to customers that include electrical distributors, retail home improvement centers, national accounts, electric utilities, municipalities and lighting showrooms located in North America and select international markets. North America accounts for the vast majority of sales. Acquisitions helped temper the top-line organic struggles, adding $15 million as Acuity purchased a firm called Sensor Switch and Lighting Control & Design.

Despite the sales decline, operating profit expanded 26.7%, to $42.7, as last year's quarter included a hefty restructuring charge related to the difficult environment Acuity encountered from a plummet in residential and commercial construction activity. A combination of lower interest expense, reasonable income tax rate and lower miscellaneous income sent net income higher by 20.1% to $23.3 million, or 53 cents per diluted share.

Outlook
Although shares prices have risen 5% throughout January, Acuity expects the rest of fiscal 2010 to remain "challenging" and sees a double-digit decline in the economic markets it serves and the second quarter will also see struggles due to seasonal factors. Its current backlog is down 14%. Analyst currently project full-year sales will fall 7.2% and earnings of $2.12 per share, which is expected to then increase by 25%, to 2.65 per share. Rivals Cooper Industries (NYSE:CBE) and Hubbell (NYSE:HUB.B) (NYSE:HUB.A) are experiencing similar difficulties in sales. The Bottom Line
Management summarized the quarter by stating its "results for the first quarter of fiscal 2010 reflect solid performance by our associates in an extremely challenging market," which was further illustrated by $41 million in operating cash flow generation after posting a negative figure last year.

Long-term debt is also very modest, at under 3% of total capitalization, which leaves room for future acquisitions. In addition to the opportunity to acquire market share, Acuity sees long-term potential as "as energy and environmental concerns come to the forefront" of the industry. This could also work in the favor of Zep Inc (NYSE:ZEP), which Acuity spun off in late 2007. (Learn three ratios that will help you evaluate your investment returns. Check out Measure Your Portfolio's Performance.)

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