AZZ shares tumble after quarterly earnings miss estimates

[Galvanizing metallic structures in a zinc bath]
BogdanVj/iStock via Getty Images

AZZ (NYSE:AZZ [https://seekingalpha.com/symbol/AZZ]) shares slumped as much as 13% on Thursday, a day after the company posted [https://seekingalpha.com/news/4502796-azz-non-gaap-eps-of-1_55-misses-by-0_02-revenue-of-417_3m-misses-by-8_85m] fiscal second-quarter results that fell short of Wall Street profit expectations.

The Texas-based provider of galvanizing and coil coating services reported adjusted earnings of $1.55 per share, up 13% from a year earlier but shy of analysts’ consensus estimate of $1.57. Revenue came in at $417.3 million, a 2% increase that missed the $426.16 million forecast.

MIXED SEGMENT PERFORMANCE

Metal Coatings, AZZ’s (NYSE:AZZ [https://seekingalpha.com/symbol/AZZ]) galvanizing division, was a bright spot, generating $190 million in sales, a 10.8% jump on the strength of infrastructure-related demand in construction, industrial, and power transmission markets. The segment delivered an adjusted earnings before interest, taxes, depreciation and amortization margin of 30.8%, though margins dipped 90 basis points year-over-year due to a higher mix of large-scale electrical and solar projects.

In contrast, the Precoat Metals business struggled with weaker end-market demand in building construction, HVAC and appliances, with sales slipping 4.3% to $227.3 million. Segment ebitda fell to $45.9 million, with margins also narrowing by 90 basis points to 20.2%.

PROFITS, CASH FLOW AND M&A

On a GAAP basis, net income surged 152% to $89.3 million, or $2.95 a share, thanks in part to a distribution from its AVAIL joint venture. Adjusted net income totaled $46.9 million, up 14%. Operating cash flow rose 23% year-over-year to $58.4 million.

The company also completed the $30.1 million acquisition of a galvanizing facility in Canton, Ohio during the quarter, while returning $11.1 million to shareholders through dividends. Net leverage stood at 1.7 times trailing ebitda.

GUIDANCE MAINTAINED

Despite the profit miss, AZZ (AZZ [https://seekingalpha.com/symbol/AZZ]) reaffirmed its full-year 2026 guidance, projecting sales of $1.63 billion to $1.73 billion, adjusted ebitda of $360 million to $400 million, and adjusted earnings of $5.75 to $6.25 a share. Management pointed to a strong M&A pipeline, disciplined cost control and ongoing demand from infrastructure spending as reasons for confidence.

“Our pipeline of M&A opportunities remains robust, reflecting the strength of our strategy and our disciplined approach to pursuing high-quality acquisition targets,” Chief Executive Tom Ferguson said in a statement. “We continue to have confidence that our full-year 2026 financial guidance is achievable.”

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