AZZ Inc. Navigates Challenges with Solid EPS Beat in Q4

AZZ Inc. (NYSE: AZZ) reported its fiscal fourth-quarter earnings for 2025, delivering a mixed performance that highlights both operational resilience and lingering headwinds. While revenue missed estimates due to weather-related disruptions, the company’s earnings per share (EPS) came in-line with expectations, driving an 8% stock surge. This article explores the key takeaways, guidance, and risks shaping AZZ’s investment thesis.

Q4 Results: Revenue Missed, but EPS Held Steady

AZZ reported Q4 revenue of $351.9 million, a 4% year-over-year decline, falling short of the $375.6 million consensus. The drop stemmed from inclement weather in key markets, which disrupted production and delayed shipments. However, the company’s adjusted diluted EPS of $0.98 matched estimates, fueled by cost management and margin improvements. GAAP EPS rose 19.6% to $0.67, excluding a one-time $75.2 million preferred stock redemption premium.

Segment Performance and Operational Strength

• Metal Coatings: Sales dipped 3.9% to $148.4 million, but EBITDA margins expanded 60 basis points to 29.2%, reflecting cost discipline.
• Precoat Metals: Revenue fell 4.1% to $203.5 million, yet margins held steady at 17.8%, despite weaker transportation demand.

Full-year 2025 results were stronger, with total sales rising 2.6% to $1.58 billion, and adjusted EPS increasing 14.8% to $5.20. Operating cash flow hit $250 million, enabling a $110 million debt reduction and lowering net leverage to below 2.5x EBITDA.

FY2026 Guidance: Prudent but Ambitious

AZZ guided for FY2026 revenue of $1.625–1.725 billion and adjusted EPS of $5.50–6.10, aligning with consensus expectations. The outlook assumes:- Continued demand in renewables, utilities, and infrastructure.
- Proceeds of over $200 million from the sale of its Electrical Products Group to nVent Electric, expected in early 2026.
- Capital expenditures trimmed to $60–80 million, excluding the completed Missouri greenfield facility.

Stock Performance and Analyst Sentiment

AZZ’s stock closed at $82.01 on April 21, 2025, up 5.9% year-to-date but lagging peers like Hayward Holdings. Analysts, however, remain bullish, with a consensus Buy rating and a $106.67 price target, implying a 30% upside. This optimism hinges on:- Balance sheet strength: Debt reduction and a neutral 0.88 debt-to-equity ratio.
- Dividend stability: A $0.17 quarterly dividend, reflecting consistent cash generation.

Key Risks and Challenges

1. Weather and Supply Chains: Q4’s revenue decline underscores reliance on stable weather and supply chains.
2. Competitive Lag: AZZ’s revenue growth (5.8%) trails peers like Hayward (17.5%), and its ROE (3.3%) is far below Griffon’s 31.3%.
3. Margin Pressures: Net margins (8.3%) remain below industry norms, limiting upside potential.

Conclusion: A Hold with Upside Potential

AZZ’s Q4 results reveal a company navigating external headwinds while maintaining profitability and balance sheet health. Its strong cash flow, debt reduction, and the upcoming nVent transaction provide a solid foundation for growth. However, concerns about revenue growth and margin expansion relative to peers temper enthusiasm.

Investors should weigh AZZ’s defensive attributes—such as its dividend and operational resilience—against its lagging growth metrics. The $106.67 analyst target suggests optimism in its turnaround plans, but execution risks remain. For now, AZZ appears a Hold, suitable for investors seeking stability with cautious upside exposure.

As management emphasizes, “weather is temporary, but strategy is permanent.” If AZZ can sustain margin improvements and capitalize on infrastructure spending, its stock could rise toward analyst targets. The next test comes with FY2026’s first-quarter results, where guidance alignment will be critical to maintaining investor confidence.