AZZ Inc. (AZZ) on Q2 2021 Results - Earnings Call Transcript
Operator: Good morning, everyone and welcome to the AZZ Inc. Second Quarter of Fiscal Year 2021 Financial Results Conference Call. [Operator Instructions] Please also note today’s event is being recorded. At this time I’d like to turn the conference call over to Mr. Joe Dorame, Lytham Partners. Sir, please go ahead. Joe Dorame: Thank you, Jamie. Good morning and thank you for joining us today to review the financial results of AZZ Inc. for the second quarter of fiscal year 2021 ended March 31st, 2020. Joining the call today are Tom Ferguson, Chief Executive Officer and Philip Schlom, Interim Chief Financial Officer, and David Nark, Senior Vice President, Marketing and Communications and Investor Relations. After the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. Please note there is a slide presentation for today's call, which can be found on AZZ's Investor Relations page under Financial Information at azz.com. Before we begin with prepared remarks, I'd like to remind everyone certain statements made by the management team of AZZ during this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Except for the statements of historical facts, this conference call may contain forward-looking statements that involve risks and uncertainties, some of which are detailed from time to time in documents filed by AZZ with the Securities and Exchange Commission, including the annual report on Form 10-K for the fiscal year ended February 29, 2020. Those risks and uncertainties include, but are not limited to, changes in customer demand and response to products and services offered by the Company, including demand by the power generation markets, electrical transmission and distribution markets, the industrial markets and the metal coatings markets; prices and raw material costs, including zinc and natural gas, which are used in the hot dip galvanizing process; changes in the political stability and economic conditions of the various markets that AZZ serves, foreign and domestic; customer-requested delays of shipments; acquisition opportunities; currency exchange rates; adequate financing and availability of experienced management and employees to implement the Company's growth strategies. In addition, AZZ's customers and its operations could potentially be adversely impacted by the ongoing COVID-19 pandemic. The Company can give no assurance that such forward-looking statements will prove to be correct. These statements are based on information as of the date hereof, and AZZ assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. With that out of the way, let me turn the call over to Tom Ferguson, Chief Executive Officer of AZZ. Tom? Thomas Ferguson: Thanks Joe, and welcome to our second quarter fiscal 2021 earnings call and thank you for joining us this morning. Let me first start by saying that COVID-19 is still very much front and center for all of us her at AZZ and continues to affect our results. Our top priorities at AZZ continue to be ensuring employee health and safety, supporting our customers during these unprecedented times finishing this fiscal year well and positioning the company for fiscal year 2022 as well as beyond. As an essential infrastructure manufacturing company, all of our facilities remained open and I am extremely proud of the way our folks manage through this crisis during our first and second quarter as well, and took care of each other and our customers. During this pandemic, we are truly grateful for everyone’s efforts that allowed us to continue safe operations of our plants worldwide. We entered the second quarter in June, which is normally the final months in the seasonal spring turnaround season. Consequently, the quarter got off to a slow start. Historically however Q2 is sequentially lower for our Infrastructure Solutions segment under any circumstances. The Metal Coatings segment navigated the economic uncertainty well. However results in our Galvanizing business were impacted by several factors beyond COVID, but I will cover these later. As a result, our second quarter consolidated sales declined 13.9% versus the second quarter of the prior year. Adjusted net income decreased 16.7% to $13 million or $0.49 per diluted share. In light of the disruptions caused by COVID on our markets in some of our operations, we decided to accelerate elements of our long-term strategic plans and initiate some strategic actions that will have longer term benefits. Our Metal Coatings segment experienced a wide range of challenges. Plants experienced disruptions from hurricanes in the Gulf to civil unrest in some cities and some even had difficulty finding direct labors. Suffice it to say it was a crazy summer. Sales fell with a $117 million for the quarter as compared to $125 million for the same quarter a year ago. I am particularly pleased with how our Galvanizing team in particular was able to benefit from lower zinc cost during the quarter while maintaining above average industry pricing. These actions, coupled with our quality workmanship and outstanding customer service resulted in overall segment margins that were flat at 23% while our Galvanizing margins in particular finished above 25%. Additionally, the Metal Coatings team did a nice job of integrating the powder coating and plating operations and sales teams during the quarter. Many of our powder coating customers that had closed to reduce production because of COVID began to place orders again. We remain committed to our strategic growth plan for the powder coating and plating business and driving meaningful margin improvement post-COVID-19 crisis. So much though that we chose to rename Surface Technologies to Powder Coating and Plating to better represent our focus for that business. Because of the impact of COVID on the oil and gas and petrochemical sectors, we made a difficult decision to classify some underutilized facilities as assets held for sale as well as closed a couple of sites and integrated their business into our other sites in the adjacent areas. We also closed one plating site, relocated its operations to a nearby plant. We are excited by the progress the new integrated team is making and the speed at which they are moving. We believe the restructuring actions that are currently in process should provide approximately $2 million of savings benefits annually. Our Infrastructure Solutions segment’s second quarter fiscal 2021 sales decreased by 22.5% to $86 million resulting in an adjusted operating income of about $3 million as compared to about $4 million in the same quarter a year ago. As I mentioned previously, the decline in sales was a result of the lack of the refinery turnaround activity in June, lower China high-voltage bus shipments and lower overall demand for some of our electrical products and services while our industrial platform shops were open and working and crews that began deploying during the quarter, the summer is usually a period of activity in line with our strategy to reduce our participation in the U.S. Nuclear sector, a lower outlook for activity in the oil and gas sector and in our desire to focus on core businesses, we initiated several restructuring actions in this segment. These include personnel actions, some site consolidations deciding to divest some non-core businesses to buyers that are interested in investing and growing these businesses and impairing $2.5 million of inventory. We believe the third quarter will be sequentially better than Q2 of this year, but turnaround activity remains constrained by COVID travel restrictions and continued low demand for gasoline and jet fuel. Due to the prolonged uncertainty associated with the recent COVID-19 pandemic on many of our end-markets and delays by some of our customers due to election uncertainty, we were not able to accurately provide an update for the full year at this time. We can say that our third quarter will be nicely improved sequentially over the second quarter that it is unlikely to generate earnings we did in the strong third quarter of last year. Our low debt level, combined with our consistent ability to generate cash gives us the confidence that we can manage both debt and liquidity satisfactorily throughout fiscal year 2021, as well as beyond. We hope to get back into a normal guidance cadence as we enter calendar year 2021 and as we see customers returning to normal business engagement levels. Our Metal Coatings business is operating at fairly normal level although there are restrictions and disruptions in some of the cities and states we operate in. We are also experiencing additional expense as we work to keep our facilities clean and safe so our employees remain healthy and productive. We are confident that our business has remained vital to improving and sustaining infrastructure. So we will use this time of global pandemic to position our core businesses to emerge stronger and better equipped to provide sustainable profitability long into the future. With that said, I will turn it over to Philip. Philip Schlom: Thanks, Tom. For the second quarter of fiscal year 2021, we reported sales of $203.4 million, a decrease of $32.8 million or 13.9% lower than the second quarter sales of $236.2 million last year. Our earnings release and 10-K reported due to the impacts of COVID and certain and restructuring and impairment charges, the company reported a net loss for the second quarter of fiscal 2021 of $1.8 million or 111.5% lower than the prior year second quarter. As a result, reported diluted earnings per share was a loss of $0.07 compared to EPS of $0.59 in the prior year’s same quarter. On an adjusted basis, reflecting the impacts of the impairments we took, the company’s net income was $13 million or $0.49 per diluted share. In the current quarter, the company reported restructuring and impairment charges of $18.7 million, $14.8 million net of associated tax benefits. As result of the restructuring, we classified four operating facilities as assets held for sale, two operating locations are within the Infrastructure Solutions segment and two are in – our two other non-operating locations are in the Metal Coatings segment. The impact of the impairments to the Metal Coatings segment operating income was $11.3 million and includes a loss of sale of Galvabar, assets held for sale impairments and impairments related to closing facilities. The impacts of the impairments to the Infrastructure segment operating income was $7.4 million including assets held for sale impairments and write-down of oil and gas tubing inventories. Q2 fiscal 2021 gross margins improved to 22.7% from 22.3% on a year-over-year basis, primarily on continued strength in the Metal Coatings segment. Operating profit, as reported for Q2 fiscal year 2021 was $0.7 million, down from $22.2 million in the prior year. On an adjusted basis, operating income was $19.3 million or 9.5% of sales, compared to 9.4% in the prior year, a 10 basis point improvement over prior year. EBITDA as reported for Q2 was $12 million. EBITDA as adjusted was $30.7 million or down 9.2% as compared to the second quarter of fiscal year 2020 with much of the reduction being directly attributable to the economic impact and business disruption associated with COVID pandemic. Year-to-date, through the second quarter of fiscal 2021, we reported sales of $416.7 million, a 20.7% decrease in the strong prior year-to-date sales of $525 million. 90% of that decrease in sales occurred within the Infrastructure Solutions segment with the company experienced the most prominent impacts of the pandemic. Fiscal year 2021 year-to-date net income for the second quarter as reported was $3.8 million, a decrease of $33.1 million from the prior year-to-date results. On an adjusted basis, taking into consideration the impairment-related charges, year-to-date net income was $18.5 million or $0.71 per diluted share, a 49.3% reduction from the prior year-to-date diluted EPS of $1.40. I will now provide highlights from the balance sheet and our liquidity position given the attention this has garnered as a result of the pandemic. For the first half of the year, cash flow from operations was $32.2 million, down $6 million or 15.7% from prior year as a result of lower sales and net income generated by the business. Free cash flow was $12.9 million on a year-to-date basis. Current borrowings on our revolver ended the second quarter of $47 million, a $31 million or 39.7% reduction from the $78 million as of yearend February. We invested $19.3 million in capital spending during the first half of the year, an increase of 17% from the prior year-to-date capital spending of $16.5 million. We repurchased $6.4 million or 200,000 shares of our stock during the quarter at an average price of just under $32 per share and we continue to announce and made dividend payments. While it slows for a period of time by the pandemic, we continue to actively pursue acquisition targets, primarily in our Metal Coatings businesses. And some great news on the liquidity front; last Friday, we finalized the refinancing and upsizing of our 5.42%, $125 million senior secured notes that are expected to mature in January of 2021. We reentered the private placement market and borrowed $150 million with a combination of seven and 12 year senior secured notes in two tranches of $70 million and $80 million with fixed rates of 2.77% and 3.17% respectively for a blended rate of 2.98%. So these notes will fund in December and January – December 2020 and January 2021. The company intends to use these proceeds to repay the notes maturing in January, as well as using the excess borrowings to reduce our revolving credit and repurchase shares to reduce further dilution from employee stock plans. Lastly, like Tom, I’d like to thank our employees for remaining committed during the difficult year, following and demonstrating the company traits by which we all strive by. With that, Tom, I’d like to turn it back to you. Thomas Ferguson: Thanks, Philip. As I did on the previous earnings call, I wanted to close by sharing with you some key indicators that we continue to pay particular attention to. For the Metal Coatings segment, fabrication activity remains solid in Q3 and we got off to a good start in September. Within our Galvanizing business, we are carefully tracking steel fabrication and construction activity. Zinc costs are relatively stable and the cost of zinc in our kettles continues to gradually decline. For Powder Coating and Plating, we are primarily focused on getting back to normal production levels with both existing and new customers, but we would like to see more activity from our aerospace customers. Within the Infrastructure Solutions segment industrial platform, we are seeing the fall turnaround activity improve, but not to the same level from last year, particularly in the U.S. market. We are carefully monitoring the COVID situation in the states with large refining capacities. Currently, we still have travel restrictions in some countries. For the Electrical Group, we are carefully tracking proposal activity and expect bookings to continue to increase this quarter and beyond, which should provide sufficient backlog for many of our business units in the back half of the year. For tubing and lighting, which make up the small portion of our electrical group, we continue to look for increased rig activity and have already taken significant realignment actions. Finally for corporate, we have very good cash management processes and have further tightened our oversight on cash flow indicators and customer credit. Currently, we are not seeing any slowdown in customer payments. So, post COVID-19 crisis, or at least as it winds down at some point, we remain committed to our growth strategy around Metal Coatings and achieving 21% to 23% operating margins, including an increased contribution from Powder Coating and Plating. We believe Galvanizing would tend to run to the high end, if not above the 23%, while Powder Coating and Plating should be able to consistently generate 15% to 20%. We believe the integration will allow the outstanding Galvanizing resources to be brought to bear to increase sales penetration, drive operational efficiencies, and leverage the seasoned business development resources and we are already seeing the benefits of that. For Infrastructure Solutions, we will continue to focus on our core businesses, seek to divest things that are not core to our future strategic interest. Most of our Infrastructure BUs are experiencing a relatively modest level of disruption due to COVID crisis and we are taking this opportunity to right-size operations and align them with expected demand post-pandemic. We feel quite confident in spite of COVID and other disruptions about the actions we have already taken and the restructuring activities that are now underway. We intend to complete our restructuring actions quickly and effectively, finish this fiscal year well, and position our businesses and our fiscal 2022 with momentum. Finally, we will remain active in the area of M&A, primarily in Metal Coatings with activities that support our strategic growth initiatives. While pandemic-related deal travel was still somewhat restricted during Q2, we do see improving conditions and have an active portfolio of opportunities to pursue and have our teams actually out in the field as we speak. We hope to close on anywhere from one to three Galvanizing deals in the balance of this year. And with that, we’ll open it up for questions. Operator: [Operator Instructions] Our first question today comes from John Franzreb from Sidoti & Company. Please go ahead with your questions. John Franzreb: Good morning, gentlemen. Thomas Ferguson: Hi, John. John Franzreb: I’ll just start with the commentary you made about the hurricane season. Perhaps Tom you can compare and contrast the potential disruptions you had in the quarter or are currently having versus the relative opportunity or not of any reconstruction activity in the region? Thomas Ferguson: Yes. It’s kind of interesting. None of our facilities thankfully hit head on. So we don’t have lot of facility damage. But it did impact our customers and their ability too. They were already in some ways particularly along the Gulf struggling with reduced demand on the oil and gas front and some were struggling to get to keep people working. So, right, I think we’ve experienced mid to moderate disruptions. It’s hard to say what opportunities we are seeing that may come out of that. We have not seen tremendous damage from our customers directly, which would be refining, petrochemical and things like that. I am going to guess though that, that on balance, we are going to pick up what we lost as the year goes. But that’s assuming we don’t have any more failures turns up. John Franzreb: Yes. Certainly deep into the season, aren’t we? Okay. And you talked a little bit about the turnaround seasons, both the fall and the spring, the fall being a little muted the spring you are getting, it sounds like bidding activity probably haven’t you have expected. Can you talk about why that’s the case or why you think that might be the case? Thomas Ferguson: Yes. I think on the replying on turnaround side in the U.S. we just, as we talked last time, we weren’t seeing the kind of activity that you normally expect at that point, because we were – ready to come into what would hopefully a busy season but we just all of – not all, but a lot of the employee activity was already focused on the spring. And I think that’s just because the refineries, even though the price of oil has increased but still naïve demand in oil and gas for gasoline – we see more claims forehand and today was the first day I looked out like condo window and saw all of the three ways jammed with traffic. So, maybe that would get better. But they just don’t have the demand in the summer to drive production. So, now the good news for the spring is that we’ve already gotten firm orders. We’ve gotten engineering orders for the spring. So our challenge for the spring is going to be accessing all of the crowd for the – and possibly access and making sure we get our crews deployed to the best opportunities. We also have seen still countries with restricted travel internationally. So, places like India, to some extent in parts of Asia, which restricts our ability to get the people to those jobs, but even though that’s most the same. We are going to – as we get into the new calendar year, in particularly the spring and we also think that spring would be a longer turnaround season than we often experience. So, longer and good. John Franzreb: Great, great. And I apologize if I missed this, but the assets that are being held for sale, there are two in Metal Coatings and two in Infrastructure, which businesses are they? Thomas Ferguson: We have – we are not quite ready to announce that yet. We’ve got some internal communication and we are under NDAs and in active negotiations. So, I want to be careful not to violate those NDAs and – but we will announce those as soon as we possibly can and they are active. They are non-core and which gives you a little direction and I am sorry, I just apologize for having to be so obtuse at this point. John Franzreb: Well, how about maybe in a broader sense which is a collective sales profile of those four businesses? Thomas Ferguson: I think, on the infrastructure side, we are looking at about $60 million in revenue roughly and really unfortunately low margin businesses, low margin contributors, or fortunately if – but we are hoping the businesses they go to can invest and do better than we’ve done with and as we’ve refocused. And I think on the Metal Coatings side, we are really talking about real estate for the most part of plants that have been closed and they are now holding the real estate for sale for the most part. John Franzreb: Great, great. Thomas Ferguson: And we can action on one of the closures, so - with one of the Galvanizing plants which we see much capacity in the area and they are further impacted by some of the issues we talked about in the Gulf Coast. We were fortunate we were able to get some really good seasoned employees to relocate to one of our other parts. So, we were pleased with that. John Franzreb: Okay. Great. Thanks for taking my questions. I’ll get back into queue. Operator: [Operator Instructions] Our next question comes from Noelle Dilts from Stifel. Please go ahead with your question. Thomas Ferguson: Hey, Noelle. Noelle Dilts: Hi. Good morning. I just wanted to build on John’s question on the non-core businesses. I know you said they were low margins, but I guess I just wanted to confirm that they are contributing to operating margin right now, they are not a drag overall. Is that fair? Thomas Ferguson: That’s fair. Noelle Dilts: Okay, and then, the second question that, again, is building on, John, is it's just could you tell us how many Galvanizing facilities you're going to have, you know, after the closures, given the closures that have occurred and the sales that you are planning? Thomas Ferguson: Well, we’d like to think we are between the closures, divestitures or I guess, disclosures and then the acquisitions will still be important. Noelle Dilts: Okay. And then, in terms of the acquisitions that you are pursuing, are they in new geographies? Could you help us to sort of understand the strategic rationale and then what you are targeting to bring in with these deals? Thomas Ferguson: Yes. We are looking to, as you know from you know us pretty well. So, we like to buy adjacent to where we already have facilities and so, this will move us hopefully further north, further northeast and yes. So, this would be in new geographies that'll be incremental to what we are doing and not overlapping for the most parts. Noelle Dilts: Okay. Great. And then I just wanted to touch on the rebranding of Energy into Infrastructure Solutions and the strategy there. So when you kind of talk about this idea of Infrastructure Solutions, I know you have a solid presence there in transmission and distribution. Could you give us a little bit more of a feel for how you are thinking about that serving that infrastructure sector as we move forward? Thomas Ferguson: I am going to let David answer that. David Nark: Yes. Good morning, Noelle. Yes, we have decided to rebrand it to really focus on those core markets of transmission, distribution and utility. We particularly like our enclosures and switchgear business, continue to invest in that area. We think that, it's an area of secular growth. The other area that we like is our Welding Solutions business. We've got a lot of great technology in that business. And we have done a really good job there of expanding into other markets. They traditionally serve, just, refining and then they've moved away from nuclear and are into all sorts of other interesting markets now that we're bringing that technology to bear. So collectively, I think those two markets, we really like and you'll continue to see us – we make moves there. Thomas Ferguson: Yes, Noelle, I want to add that I think in Welding Solutions, about 40% of their business is now non-refinery related. So we've been able to transition away from most of the nuclear and replace a chunk of that refinery business with other markets in the infrastructure sector and the technology is really outstanding, so. Noelle Dilts: Okay, great. That's helpful. And then finally, just on, Galvanizing and Metal Coatings, I know you mentioned aerospace is still a little bit weaker, but any other verticals that you could call out in terms of particular strength or weakness in the quarter? Thomas Ferguson: We've seen truck and trailer has been improving, Ag is improving, wind solar has been really, really active. This move to renewables with a lot of areas has been really big for us and there is a lot of steel on those. And then we've seen the transmission has been good as well. Noelle Dilts: Thank you. Operator: And our next question comes from DeForest Hinman from Walthausen & Company and Company. Please go ahead with your question. DeForest Hinman: Hi. Thanks for taking my questions. Very nice transaction on the debt side. Private placement going out seven and 12 years is a lot further than we've been seeing. Some companies go out, but still maintaining a very attractive fixed rate. Can you just give us any color there in terms of covenants attached to that debt and /or any other thing we should be aware about that on that debt? Philip Schlom: Yes, this is Philip. No, we entered the market, it's a good stable rate environment. We entered the private placement market after 10 years, but being outside that market and had a mix of new investors and existing investors join in on our on our deal. We are able to upsize. We had a tremendous amount of interest in our offering. So we are able to upsize and we are also able to spread out some of our risk related to covenants. We were able to increase basket sizes and things like that with different covenants within our deal. So, that really helps us as we look forward. DeForest Hinman: And so - just so we are all, is there anyone to call out debt-to-EBITDA covenant? Philip Schlom: No, our primary covenant, our leverage covenant is in line with our current credit facility at three and a quarter to one, but it was more the different covenants and baskets that we were able to stretch out on the acquisition baskets and dividend payment baskets, things like that. DeForest Hinman: Okay. Very, very helpful. This positions to the company very well going forward and probably builds into the next question, on the M&A side, you talked about deals. It sounds like you want to try to get them closed. I think you said by the end of the year, is that your calendar year or fiscal year? Thomas Ferguson: Well, I'd like to get them done by the end of the calendar year but given some of the travel things and stuff like that it may be - we'll get one or two done in the calendar year and I hope we get three done by the end of the fiscal year, so. DeForest Hinman: Okay. And can you help us understand the - what you are seeing in terms of outlay? I know we just redid the debt. We got a lot of availability on the revolver, ballpark in terms of cash outlay to get those deals done and any color you can provide on multiple range that you're seeing? Thomas Ferguson: Yes. These are these are our traditional galvanizing deals. So, they tend to be under $10 million each. Although in this case, there could be one larger, but that gives you a ballpark and we tend to target five to seven times. And what I - the history of our Galvanizing team is they tend to within – with very quick integration and bring in their scale to bear that would usually able to improve that by at least well in term within the first year. DeForest Hinman: Okay. And then, M&A, on the sales side, can you give us any update in terms of what you think timing-wise on some of those transactions? And then, I know you have the NDAs and I respect that. Thomas Ferguson: Yes. DeForest Hinman: Any color you could provide in terms of proceeds potentially from those transactions? And what will we do with those proceeds from that? Thomas Ferguson: Yes. Couple things there. We are trying to get these done as quickly as possible. We've been working on it for a little while and just, somewhat restricted by travel but, now the focus is to get those done as quickly as possible. So my intent, assuming that we are successful, get them done before the end of this calendar year, which means we probably have to get them done before we get deep into the holidays. So, proceeds are not going to be major or not anything that's going to move the needle to any great extent. What we are doing is getting out from under the CapEx that they draw the resources, they draw the - just the various corporate functions that support them and so we free up resources to focus on the growth side and focus on the core and they will generate a little bit of cash. DeForest Hinman: Okay. And then, can you give us all an update on the capital allocation focus post-restructuring? And I know you are working on the deals you just discussed, but maybe more broadly as it relates to the dividend strategy going forward, share repurchases and you bought some stock at somewhat lower valuations to offset dilutions. But, has there been an updated discussion with the Board about buybacks potentially more than offsetting dilution actually looking to reduce the share count? Thomas Ferguson: We've had discussions. We are not ready to really announce going beyond minimizing dilution or buying in, in the dilution. But that is something we are continuing to focus on. We do deploy quite a bit of CapEx into, particularly our Metal Coatings business to keep it productive and efficient and continue to invest in things like DGS. We did have the CapEx that will continue to deploy, particularly into WSI for both their facilities and technology that I spoke up. We announced the dividend. We - it's been a long time since we haven't paid a dividend. So, but each time we look at it and it might where we're looking at, I don't see any reason why we would withdraw it at this point. It's got a decent yield. And at this time, until we see bigger acquisition opportunities and that would be attractive we are probably going to continue to be committed to that. And then on the acquisition front, you know it's just not given the cost of our debt. It's - there is just not a huge drop of all the deals we talked about are just pretty easy to tuck-in. DeForest Hinman: I would just add this just more of a comment, being able to turn out your debt the way you did with the private placement now which is very positive development. I know you are working on to getting that refinance. I think we were discussing that on the last call. But, really locking in very attractive rates, seven years and 12 years is kind of a game changer for you from a cost of capital perspective. I would believe you’re already working on initial discussions with your revolver. But in an environment where you have clear cost of capital outlook out potentially, five, six, seven years, very low cost of debt, maybe not very large deals, it would seem that there would have to be a greater discussion on greater dividend payouts or share repurchases or a combination of both. Thomas Ferguson: Well, the good news is, as we as we get this quarter wrapped up, this is where we usually do our - we’re a little delayed on doing our strategic planning engagements. So, we will be doing that over the next few weeks and we’ll definitely take that into consideration. Operator: [Operator Instructions] On to our next question comes from Bill Baldwin from Baldwin Anthony Securities. Please go ahead with your question. Thomas Ferguson: Hi, Bill. Bill Baldwin: Thank you. Good morning. Good morning. Couple of areas here, Tom, can you give us any color as to the kind of the proposal activity or sales pipeline you are seeing in your domestic enclosure and switchgear businesses at this point in time? Thomas Ferguson: Yes, it's improving and we are seeing engineering firms and contractors come back to - kind of - I don't know if they are coming back to the office, but we're definitely seeing more activity and we feel good about – about the outlook, the balance of this year and hopefully get some things in place. We've also taken the opportunity to continue to train and work on improving the professionalism of all our sales organizations during this time. And feel good about our opportunity pipeline, as well as our visibility and ability to drive value. So, so, yes, we're feeling pretty good. Bill Baldwin: Super, super. So, that's like maybe beyond the fiscal 2022 a little bit of momentum going after there. Thomas Ferguson: I am hoping. Bill Baldwin: Draw your stand. Second area I wanted to cover just briefly, Tom, is your international area. I know you had some ongoing projects with joint ventures in the bus business. Can you kind of bring us up to date as to where we stand on those projects at this point? Thomas Ferguson: The high-voltage bus business in China, there is a ton of activity. It tends to not be in our sweet spot. We are continuing to work on a joint venture partner over there that would allow us to handle it better with - from that side. We have seen activity for the high-voltage bus in domestically and we did - we do have things going on in Saudi Arabia, as well. So, it's kind of a mixed bag, but we see a lot of activity. It's just we're not seeing a whole lot to get too excited. So, we're using good discipline around that. Bill Baldwin: Okay. So that's more of a long-term situation. Thomas Ferguson: It is. It is. Bill Baldwin: In the Middle East, okay. And the second question internationally do you see opportunity Tom, to take your enclosure and switchgear business into some international markets for AZZ? Thomas Ferguson: That would probably require us to go acquire something and right now, that's just not on our on our radar. So, and that will be one that we'll take your comments to heart and make sure we do have that discussion as we get into our strategic planning process. Bill Baldwin: And lastly, domestically, switchgear enclosure, do you feel like you've got the facilities you need right now to conduct that business the way you want to here in North America? Or do you see a need for some additional products and/or locations to really flush out that business for you? Thomas Ferguson: I just took a tour of those facilities with some of our executive team and we are really pleased with the progress, our three enclosure sites have made. I only made it to one of the switchgear sites and - but the big one in Fulton. The teams are really working well together. I think I've seen progress in their supply chain, their design standardization. Things that they've had to do, working remotely - I mean, doing it apart instead of putting teams together. And I am encouraged. So, I feel good with the five facilities we currently have. This will always be an area if – as has happened in the last two deals. They will particularly when we acquired Lectrus, it was an opportunistic kind of thing. So, it's an area we don't have anything on our radar screen right now. But if it gets something popped up, we'll take a look at it. The key right now is, we have plenty of capacity. So - and we like kind of the distribution of it. So, because we are over on the East Coast, outside of Baltimore, we are in Chattanooga with a large facility. We are in Fulton, Missouri. We are in the Southeast corner of Kansas. We are up in Oshkosh, Wisconsin. So, right now, we like our distribution given where the activity is and as we haven't had to go chase a whole lot down in the Gulf Coast. So, it's plenty of capacity and just need to see more opportunities, but we feel good about our position. Bill Baldwin: Very good. That's good color. Appreciate it and best of success. Thomas Ferguson: All right. Thanks, Bill. Okay, well, I think that's it. Good. Operator: Yes sir. At this time, we have reached the end of the question and answer session. I'd like to turn the conference call back over to Mr. Ferguson for any closing remarks. Thomas Ferguson: All right. Thank you. All right. Thanks, everybody. We've had good discussions and we look forward to finishing a reasonable third quarter and continue to let COVID and elections and things like that settle. And then, we will have completed a strategic planning process, which was delayed while we saw how things going to sorted themselves out. And we'll get back to that. So, hopefully, by the time we get to this call for the third quarter, we'll be able to talk to you in more detail about what's now fully core. What's not core. What is likely. Hopefully we'll have some announcements. We have seen some of the transactions we've talked about. And then also talk to you about how the outlook is for Metal Coatings going forward and that kind of things. So, thank you for your time. Look forward to talking more over as this quarter plays out. Thank you. Operator: And ladies and gentlemen, with that we will conclude today's conference call. We do thank you for joining. You may now disconnect your lines.
AZZ Inc. (NYSE:AZZ) Surpasses Earnings Estimates with Strong Financial Performance
- AZZ Inc. (NYSE:AZZ) reported an EPS of $1.39, surpassing the estimated $1.24 and reflecting significant growth.
- The company's revenue reached approximately $403.65 million, indicating a 5.8% increase year-over-year.
- AZZ announced a debt reduction of $35 million for the quarter, contributing to a healthier balance sheet.
AZZ Inc. (NYSE:AZZ) is a prominent player in the metal coatings and coil coating industry, providing essential services like hot-dip galvanizing. The company competes with other industry leaders in delivering protective coatings for metal products. AZZ's recent financial performance highlights its strong market position and operational efficiency.
On January 7, 2025, AZZ reported earnings per share (EPS) of $1.39, surpassing the estimated $1.24. This performance also exceeded the Zacks Consensus Estimate of $1.29, marking a significant improvement from the $1.19 EPS reported in the same quarter last year. The company's revenue reached approximately $403.65 million, exceeding the estimated $396.64 million, and reflecting a 5.8% increase compared to the previous year.
AZZ's Metal Coatings segment saw a 3.3% rise in sales to $168.6 million, while Precoat Metals sales increased by 7.6% to $235.1 million. The company's net income for the quarter was $33.6 million, a 25% increase, with adjusted net income reaching $41.9 million, up 20.5%. The adjusted EBITDA was $90.7 million, representing 22.5% of sales, with segment margins of 31.5% for Metal Coatings and 19.1% for Precoat Metals.
The company also made a debt reduction of $35 million during the quarter, contributing to a fiscal year-to-date debt reduction of $80 million, resulting in a net leverage ratio of 2.6x. AZZ announced a cash dividend of $0.17 per share and successfully repriced its Term Loan B, reducing the future borrowing rate by 75 basis points to SOFR+2.50%.
AZZ's financial metrics indicate a strong market valuation, with a price-to-earnings (P/E) ratio of approximately 20.60 and a price-to-sales ratio of about 1.59. The enterprise value to sales ratio is around 1.61, and the enterprise value to operating cash flow ratio is approximately 10.26. The company's earnings yield is about 4.85%, and it maintains a low debt-to-equity ratio of 0.03, with a current ratio of approximately 1.77, indicating solid financial health.
AZZ Inc. (NYSE:AZZ) Surpasses Earnings Estimates with Strong Financial Performance
- AZZ Inc. (NYSE:AZZ) reported an EPS of $1.39, surpassing the estimated $1.24 and reflecting significant growth.
- The company's revenue reached approximately $403.65 million, indicating a 5.8% increase year-over-year.
- AZZ announced a debt reduction of $35 million for the quarter, contributing to a healthier balance sheet.
AZZ Inc. (NYSE:AZZ) is a prominent player in the metal coatings and coil coating industry, providing essential services like hot-dip galvanizing. The company competes with other industry leaders in delivering protective coatings for metal products. AZZ's recent financial performance highlights its strong market position and operational efficiency.
On January 7, 2025, AZZ reported earnings per share (EPS) of $1.39, surpassing the estimated $1.24. This performance also exceeded the Zacks Consensus Estimate of $1.29, marking a significant improvement from the $1.19 EPS reported in the same quarter last year. The company's revenue reached approximately $403.65 million, exceeding the estimated $396.64 million, and reflecting a 5.8% increase compared to the previous year.
AZZ's Metal Coatings segment saw a 3.3% rise in sales to $168.6 million, while Precoat Metals sales increased by 7.6% to $235.1 million. The company's net income for the quarter was $33.6 million, a 25% increase, with adjusted net income reaching $41.9 million, up 20.5%. The adjusted EBITDA was $90.7 million, representing 22.5% of sales, with segment margins of 31.5% for Metal Coatings and 19.1% for Precoat Metals.
The company also made a debt reduction of $35 million during the quarter, contributing to a fiscal year-to-date debt reduction of $80 million, resulting in a net leverage ratio of 2.6x. AZZ announced a cash dividend of $0.17 per share and successfully repriced its Term Loan B, reducing the future borrowing rate by 75 basis points to SOFR+2.50%.
AZZ's financial metrics indicate a strong market valuation, with a price-to-earnings (P/E) ratio of approximately 20.60 and a price-to-sales ratio of about 1.59. The enterprise value to sales ratio is around 1.61, and the enterprise value to operating cash flow ratio is approximately 10.26. The company's earnings yield is about 4.85%, and it maintains a low debt-to-equity ratio of 0.03, with a current ratio of approximately 1.77, indicating solid financial health.
AZZ Inc. (NYSE:AZZ) Earnings Preview: Key Financial Insights
- Earnings per share projected to be $1.24 with revenue expected to reach approximately $396.6 million.
- Price-to-earnings (P/E) ratio stands at 21.05, and price-to-sales ratio is 1.56, indicating market valuation.
- Enterprise value to sales ratio of 2.15 and enterprise value to operating cash flow ratio of 13.77 highlight AZZ's valuation and financial leverage.
AZZ Inc. (NYSE:AZZ) is a prominent player in the industrial sector, specializing in hot-dip galvanizing and coil coating solutions. The company is headquartered in Fort Worth, Texas, and is known for its robust service offerings. As AZZ prepares to release its quarterly earnings on January 8, 2025, investors are keenly observing the company's financial health and market performance.
Wall Street projects AZZ's earnings per share to be $1.24, with revenue expected to reach approximately $396.6 million. Despite these optimistic forecasts, Zacks Investment Research suggests that AZZ might not have the ideal mix of factors to exceed these expectations. This has led to a cautious approach among investors and analysts as they await the earnings report.
AZZ's financial metrics provide a deeper understanding of its market position. The company has a price-to-earnings (P/E) ratio of 21.05, reflecting the market's valuation of its earnings. Additionally, the price-to-sales ratio is 1.56, indicating the amount investors are willing to pay for each dollar of sales. These figures help investors gauge AZZ's market valuation.
The enterprise value to sales ratio of 2.15 and the enterprise value to operating cash flow ratio of 13.77 highlight AZZ's valuation, considering its debt and cash positions. These metrics are crucial for understanding the company's financial leverage and cash-generating capabilities. AZZ's debt-to-equity ratio of 0.92 further illustrates its leverage level, while a current ratio of 1.85 suggests a strong ability to meet short-term liabilities.
As the earnings release date approaches, analysts have revised their forecasts, reflecting the anticipation surrounding AZZ's financial performance. The company's earnings yield of 4.75% offers insight into the potential return on investment for shareholders. This upcoming announcement is expected to draw significant attention from investors and stakeholders interested in AZZ's market trajectory.
AZZ Inc. (NYSE:AZZ) Earnings Preview: Key Financial Insights
- Earnings per share projected to be $1.24 with revenue expected to reach approximately $396.6 million.
- Price-to-earnings (P/E) ratio stands at 21.05, and price-to-sales ratio is 1.56, indicating market valuation.
- Enterprise value to sales ratio of 2.15 and enterprise value to operating cash flow ratio of 13.77 highlight AZZ's valuation and financial leverage.
AZZ Inc. (NYSE:AZZ) is a prominent player in the industrial sector, specializing in hot-dip galvanizing and coil coating solutions. The company is headquartered in Fort Worth, Texas, and is known for its robust service offerings. As AZZ prepares to release its quarterly earnings on January 8, 2025, investors are keenly observing the company's financial health and market performance.
Wall Street projects AZZ's earnings per share to be $1.24, with revenue expected to reach approximately $396.6 million. Despite these optimistic forecasts, Zacks Investment Research suggests that AZZ might not have the ideal mix of factors to exceed these expectations. This has led to a cautious approach among investors and analysts as they await the earnings report.
AZZ's financial metrics provide a deeper understanding of its market position. The company has a price-to-earnings (P/E) ratio of 21.05, reflecting the market's valuation of its earnings. Additionally, the price-to-sales ratio is 1.56, indicating the amount investors are willing to pay for each dollar of sales. These figures help investors gauge AZZ's market valuation.
The enterprise value to sales ratio of 2.15 and the enterprise value to operating cash flow ratio of 13.77 highlight AZZ's valuation, considering its debt and cash positions. These metrics are crucial for understanding the company's financial leverage and cash-generating capabilities. AZZ's debt-to-equity ratio of 0.92 further illustrates its leverage level, while a current ratio of 1.85 suggests a strong ability to meet short-term liabilities.
As the earnings release date approaches, analysts have revised their forecasts, reflecting the anticipation surrounding AZZ's financial performance. The company's earnings yield of 4.75% offers insight into the potential return on investment for shareholders. This upcoming announcement is expected to draw significant attention from investors and stakeholders interested in AZZ's market trajectory.
Jefferies Initiates Coverage on AZZ with a Buy Rating
- Jefferies has initiated coverage on AZZ, signaling a positive outlook towards the company's future.
- AZZ holds an average brokerage recommendation (ABR) of 1.67, indicating a strong belief in its growth potential.
- The company's stock has shown significant growth, with a high of $84.52 from a low of $34.59, demonstrating resilience and potential for further appreciation.
Jefferies, a well-known financial services company, recently initiated coverage on NYSE:AZZ, giving it a Buy rating. This move, as reported by StreetInsider, signals a positive outlook from Jefferies towards AZZ. At the time of this rating, AZZ's stock was trading at $76.63. AZZ Inc. operates in the specialty electrical equipment and engineering services sector, providing solutions to industrial, power generation, and utility markets. Its activities include manufacturing electrical equipment and providing galvanizing services. The company competes with other firms in the electrical and industrial service sectors, but this optimistic rating from Jefferies suggests confidence in AZZ's market position and growth potential.
The optimism from Jefferies is echoed by other Wall Street analysts as well. According to Zacks Investment Research, AZZ holds an average brokerage recommendation (ABR) of 1.67, positioning it between Strong Buy and Buy. This rating is derived from the recommendations of three brokerage firms, with two-thirds of them rating AZZ as a Strong Buy. This consensus among analysts indicates a strong belief in AZZ's potential for growth and favorable market performance.
AZZ's stock performance and market valuation further support the positive outlook from analysts. Despite a slight decrease of $0.27 in its stock price, bringing it to $76.63, the company's shares have shown significant growth over the year, reaching a high of $84.52 from a low of $34.59. This growth trajectory highlights AZZ's resilience and potential for further appreciation. With a market capitalization of approximately $2.28 billion and a trading volume of 235,231 shares, AZZ demonstrates solid market presence and investor interest.
The company's stock price fluctuation within the trading day, ranging from a low of $75.455 to a high of $77.3, reflects normal market volatility. However, the overall positive trend in its yearly performance, coupled with strong support from financial analysts, suggests a stable and promising future for AZZ. The backing by Jefferies, along with the favorable average brokerage recommendation, underscores confidence in AZZ's strategic direction, operational efficiency, and ability to navigate market challenges.
In summary, the initiation of coverage by Jefferies with a Buy rating, alongside the optimistic view shared by other analysts, paints a bright picture for AZZ. The company's strong market position, evidenced by its stock performance and analyst ratings, indicates potential for continued growth and success in its sector. Investors and market watchers will likely keep a close eye on AZZ, anticipating its moves in the competitive landscape of the specialty electrical equipment and engineering services market.
AZZ Inc. Receives New $85 Price Target from B.Riley's Lucas Pipes
Lucas Pipes of B.Riley Financial Sets New Price Target for AZZ Inc. (NYSE:AZZ)
Lucas Pipes of B.Riley Financial has recently set a new price target of $85 for AZZ Inc. (NYSE:AZZ), as reported by StreetInsider on April 23, 2024. This adjustment suggests a potential upside of approximately 11.11% from the stock's trading price at the time of the announcement, which was $76.5. This optimistic outlook from the analyst comes on the heels of AZZ's Q4 2024 Earnings Conference Call, which provided a comprehensive overview of the company's financial performance and strategic direction. The earnings call, detailed in a transcript published by Seeking Alpha, featured key company participants and was attended by analysts including Lucas Pipes, indicating a keen interest in AZZ's business trajectory.
AZZ Inc. reported a notable quarterly earnings of $0.93 per share, surpassing the Zacks Consensus Estimate of $0.70 per share. This performance not only represents a significant improvement from the $0.30 per share reported in the same quarter a year ago but also marks an earnings surprise of 32.86% for the quarter. Such a strong financial outcome underscores the company's robust position in the electrical equipment manufacturing sector and its ability to exceed market expectations consistently. This follows a trend where AZZ outperformed earnings expectations in the previous quarter as well, with earnings of $1.19 per share against an anticipated $0.99, resulting in a 20.20% surprise.
In terms of revenue, AZZ announced figures of $366.5 million for the quarter ending in February 2024, which also beat the Zacks Consensus Estimate by 3.49%. This revenue figure not only represents an increase from the $336.5 million reported in the year-ago period but also highlights the company's consistent ability to surpass consensus revenue estimates in three of the last four quarters. Such performance is indicative of AZZ's strong presence and competitive edge in the Manufacturing - Electronics industry.
For the fiscal year 2024, AZZ Inc. achieved remarkable financial milestones, including total sales of approximately $1.54 billion, marking a 16.2% increase from the previous year. This sales growth was driven by its Metal Coatings and Precoat Metals segments, showcasing the company's diversified and robust business model. The company's diluted earnings per share (EPS) stood at $3.46, a 48.5% increase, highlighting significant profitability improvements. Additionally, AZZ reported a net income rise to about $101.6 million, a 53.2% increase, with adjusted net income at approximately $132.8 million, up 39.5%. Such financial health is further evidenced by the company's ability to reduce its debt by $115.0 million during the year, showcasing strong financial management and operational efficiency.
The financial results and strategic achievements discussed during AZZ's Q4 2024 Earnings Conference Call provide a solid foundation for Lucas Pipes' optimistic price target. The company's record sales, profitability, and cash flow for the fiscal year ended February 29, 2024, coupled with its consistent performance in exceeding earnings and revenue estimates, paint a promising picture for AZZ's future. This backdrop of strong financial health and strategic direction likely informed Pipes' analysis and the subsequent setting of a new price target, reflecting confidence in AZZ's continued growth and value creation.
