AZZ 3Q Profit Jumps on Higher Sales

AZZ Inc. (AZZ), a leading provider of hot-dip galvanizing and coil coating solutions, reported strong fiscal third-quarter results, with total sales reaching $403.7 million, up 5.8% year-over-year. The company's performance was driven by growth in both segments: Metal Coatings sales increased 3.3% to $168.6 million, while Precoat Metals sales grew 7.6% to $235.1 million. Net income rose 25% to $33.6 million, with adjusted diluted EPS of $1.39, up 16.8%. The company achieved an Adjusted EBITDA of $90.7 million, representing 22.5% of sales. Notable financial improvements include a $35 million debt reduction in Q3 and $80 million year-to-date, resulting in a net leverage ratio of 2.6x.

Based on strong performance, AZZ narrowed and raised its FY2025 guidance, projecting sales of $1.550-1.600 billion and adjusted EBITDA of $340-360 million. The company's robust Q3 FY2025 performance was marked by several noteworthy metrics. Revenue growth of 5.8% to $403.7 million was driven by strong performances in both segments. The Metal Coatings division saw 3.3% growth, while Precoat Metals grew by an impressive 7.6%. More importantly, profitability metrics showed significant improvement with net income increasing 25% to $33.6 million.

The company's debt reduction of $80 million year-to-date and improved net leverage ratio of 2.6x demonstrate strong cash flow management. The $185.6 million operating cash flow for the first nine months reflects excellent working capital efficiency. The Term Loan B repricing, reducing borrowing costs by 75 basis points, will positively impact future interest expenses. The revised FY2025 guidance of $1.55-1.6 billion in sales and adjusted EBITDA of $340-360 million suggests management's confidence in continued strong performance. The improved EPS guidance of $5.00-5.30 indicates enhanced profitability expectations.

The market dynamics supporting AZZ's growth remain robust across key sectors. The Metal Coatings segment's performance, particularly the 5.2% increase in galvanizing sales, reflects strong demand in construction, industrial, and transmission/distribution markets. The segment's EBITDA margin expansion of 150 basis points to 31.5% demonstrates operational excellence and cost management. Precoat Metals' revenue growth and margin improvement to 19.1% highlight successful market share gains in strategic sectors like HVAC and transportation. The new Washington, Missouri facility investment aligns with market expansion strategies and positions AZZ for continued growth in high-demand areas.



AZZ's strategic focus on operational efficiency and market penetration, combined with favorable end-market conditions, suggests sustainable growth potential. The balanced approach to capital allocation between debt reduction, dividends, and strategic investments provides a solid foundation for long-term value creation. Investors should consider AZZ as a strong contender in the hot-dip galvanizing and coil coating solutions market, given its robust financial performance and growth prospects.