AZZ (NYSE:AZZ) Reports Sales Below Analyst Estimates In Q1 Earnings
Metal coating and infrastructure solutions provider AZZ (NYSE:AZZ) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 4% year on year to $351.9 million. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $1.68 billion at the midpoint. Its non-GAAP profit of $0.98 per share was in line with analysts’ consensus estimates.
Revenue: $351.9 million vs analyst estimates of $367.8 million (4% year-on-year decline, 4.3% miss)
Adjusted EPS: $0.98 vs analyst estimates of $0.98 (in line)
Adjusted EBITDA: $71.18 million vs analyst estimates of $73.34 million (20.2% margin, 2.9% miss)
Management’s revenue guidance for the upcoming financial year 2026 is $1.68 billion at the midpoint, in line with analyst expectations and implying 6.2% growth (vs 2.5% in FY2025)
Adjusted EPS guidance for the upcoming financial year 2026 is $5.80 at the midpoint, missing analyst estimates by 0.7%
EBITDA guidance for the upcoming financial year 2026 is $380 million at the midpoint, above analyst estimates of $369.1 million
Operating Margin: 11.5%, down from 13% in the same quarter last year
Market Capitalization: $2.42 billion
Tom Ferguson, President, and Chief Executive Officer of AZZ, commented, “Fiscal year 2025 was a successful year for AZZ. We delivered record full year results and made significant progress on our growth initiatives throughout the year. We are pleased with full-year sales growth of 2.6%, which includes record results in both Metal Coatings and Precoat Metals, despite navigating significant weather impacts in the fourth quarter. For the year, our Metal Coatings segment delivered sales of $665.1 million, and 30.9% EBITDA margin, while Precoat Metals delivered sales of $912.6 million and 19.6% EBITDA margin.
Responsible for projects like nuclear facilities, AZZ (NYSE:AZZ) is a provider of metal coating and power infrastructure solutions.
Commercial building products companies, which often serve more complicated projects, can supplement their core business with higher-margin installation and consulting services revenues. More recently, advances to address labor availability and job site productivity have spurred innovation. Additionally, companies in the space that can produce more energy-efficient materials have opportunities to take share. However, these companies are at the whim of commercial construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of commercial building products companies.
A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, AZZ grew its sales at a decent 8.2% compounded annual growth rate. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.
AZZ Quarterly Revenue
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. AZZ’s annualized revenue growth of 9.2% over the last two years aligns with its five-year trend, suggesting its demand was stable. AZZ’s recent performance shows it’s one of the better Commercial Building Products businesses as many of its peers faced declining sales because of cyclical headwinds.
AZZ Year-On-Year Revenue Growth
This quarter, AZZ missed Wall Street’s estimates and reported a rather uninspiring 4% year-on-year revenue decline, generating $351.9 million of revenue.
Looking ahead, sell-side analysts expect revenue to grow 5.9% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
AZZ has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Analyzing the trend in its profitability, AZZ’s operating margin rose by 5.3 percentage points over the last five years, as its sales growth gave it immense operating leverage.
AZZ Trailing 12-Month Operating Margin (GAAP)
In Q1, AZZ generated an operating profit margin of 11.5%, down 1.5 percentage points year on year. Since AZZ’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
AZZ’s EPS grew at a remarkable 13.9% compounded annual growth rate over the last five years, higher than its 8.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
AZZ Trailing 12-Month EPS (Non-GAAP)
We can take a deeper look into AZZ’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, AZZ’s operating margin declined this quarter but expanded by 5.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For AZZ, its two-year annual EPS growth of 24% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q1, AZZ reported EPS at $0.98, up from $0.93 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects AZZ’s full-year EPS of $5.20 to grow 12.1%.
It was great to see AZZ’s full-year EBITDA guidance top analysts’ expectations. On the other hand, its revenue and EBITDA fell short of Wall Street’s estimates. Overall, this was a mixed quarter. The stock remained flat at $77.62 immediately following the results.
