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The next earnings season has not quite started yet, so it was probably easy to miss potentially indicative earnings warnings last week from two companies with combined market capitalization of just over $3 billion. Acuity Brands, Inc. (AYI) - an Atlanta-based company that designs, produces, and distributes lighting fixtures and related products for commercial and residential buildings - indicated that construction activity will continue to drop through into next year. MSC Industrial Direct Company (MSM) - a New York-based company that sells industrial products - indicated that its customers see no near-term improvement in economic conditions. Some specifics:
AYI reported revenues of $2 billion last fiscal year. Nine months into its current fiscal year, AYI saw its revenues fall 18% compared to the previous 9-month period. Gross margins have bounced between 35-40%. Chairman, President, and CEO Vernon Nagel warned : “Looking ahead, we continue to foresee a very difficult economic environment, particularly for non-residential construction activity, a primary market for us. Key indicators continue to signal declines for both residential and non-residential construction activity for the balance of 2009 and into 2010."
MSM reported revenues of $1.8 billion last fiscal year. Nine months into its current fiscal year, MSM suffered a 17% drop in revenue compared to the previous 9-month period. Gross margins have held steady around 45%. President and CEO David Sandler reported (PDF): "While our performance in the fiscal third quarter was better than anticipated, visibility remains limited as we continue to operate in one of the most severe economic downturns our industry has ever experienced. Feedback from our customers indicates that market conditions have remained weak without any expected near-term improvement. As a result, we are anticipating summer shutdowns that will be more prevalent and longer in duration than last year..."
AYI and MSM are mid-cap companies, but their observations on business conditions could loom large for the earnings results that lie ahead for the next few weeks. These results should provide catalysts to break the S&P 500 (down?) from its two-month trading range. (For a technical analysis on some possibilities, see S&P 500 Update July 1st). Stay tuned.
(All earnings data provided by Gridstone Research).
Be careful out there!
Full disclosure: no positions. For other disclaimers click here.