Metal coating and infrastructure solutions provider AZZ (NYSE:AZZ) missed Wall Street’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: 13.5%, down from 14.6% in the same quarter last year
Free Cash Flow Margin: 9.8%, similar to the same quarter last year
Market Capitalization: $2.39 billion
AZZ’s first quarter was impacted by severe winter weather, leading to over 200 lost production days and contributing to a revenue shortfall. Management emphasized that both the Metal Coatings and Precoat Metals segments faced lower volumes, but noted that operational improvements helped maintain gross margins. CEO Tom Ferguson highlighted that, despite these challenges, the company quickly recovered lost production in March and April, stating, “We’re looking for a very strong first quarter on the Metal Coatings side, and they’re out of the gate really, really well.”
For the year ahead, AZZ’s guidance reflects steady infrastructure demand and minimal tariff impact on key inputs like zinc. Management reiterated its revenue outlook, with Ferguson noting, “We anticipate delivering above-market growth while getting some bolt-on acquisitions done.” The company expects to benefit from continued investments in infrastructure and the ramp-up of its new aluminum coil coating facility, while maintaining a disciplined approach to capital allocation and growth.
AZZ’s management pointed to weather-related disruptions as the primary cause of the revenue miss, but maintained confidence in the company’s long-term positioning and operational recovery. The team also discussed the successful ramp-up of new facilities and outlined its approach to capital deployment and acquisitions.
Weather impact on production: Inclement weather resulted in over 200 lost production days, particularly affecting the Metal Coatings segment. Management said nearly all lost revenue was recovered in March and April as conditions improved.
Operational improvements support margins: Despite volume declines, operational enhancements in both core segments contributed to stable gross margins, with Metal Coatings achieving a 30.9% EBITDA margin for the year.
New plant ramp-up underway: The Precoat Metals segment began commercial shipments from its new aluminum coil coating facility in Missouri, supported by contracts covering about 75% of its capacity. Management expects the plant to be a positive margin contributor as it ramps through the year.
Limited input cost risk from tariffs: The company indicated that key input zinc is exempt from current tariffs, alleviating concerns about supply or cost disruptions. Other minor supply items have seen some cost increases, but management is addressing these through price adjustments.
Active M&A pipeline: Management is pursuing bolt-on acquisitions in galvanizing and larger opportunities in coil coating, emphasizing a disciplined approach and expectation for at least one deal to close in the current quarter.
AZZ’s management reaffirmed guidance for the upcoming year, projecting revenue of $1.68 billion at the midpoint, adjusted EBITDA of $380 million, and adjusted EPS of $5.80—numbers that align closely with analyst expectations.
Infrastructure spending tailwinds: Ongoing public and private investments in infrastructure, including bridge, highway, and transmission projects, are expected to sustain demand for AZZ’s coatings and metal products.
New facility contributions: The recently launched aluminum coil coating plant is anticipated to increase segment margins and drive incremental top-line growth as it ramps toward full utilization.
Capital allocation and acquisition strategy: Management plans to allocate capital between further debt reduction, potential share buybacks, and disciplined acquisitions, which could enhance future earnings but also introduce execution risks if integration or market conditions shift.
Adam Thalhimer (Thompson, Davis): Asked about the recovery from weather disruptions and the outlook for Q2, to which management responded that lost revenues in Metal Coatings have already been recouped, with production running ahead of expectations in March and April.
John Franzreb (Sidoti & Company): Inquired about the order book’s momentum amid macro uncertainty; management noted optimism in customer activity and no significant project delays tied to current economic conditions.
Mark Reichman (NOBLE Capital Markets): Sought clarity on debt reduction goals and capital allocation after the divestiture proceeds; management indicated that $300 million in debt reduction is realistic, with some funds possibly allocated to share buybacks.
Ghansham Panjabi (Baird): Queried about incremental positives in the guidance compared to earlier in the year; management highlighted a strong Q1 start and anticipated bolt-on acquisitions as key sources of upside.
Timna Tanners (Wolfe Research): Asked about the impact of tariffs on materials and potential downstream benefits; management explained that zinc is exempt from tariffs, and some minor inputs face higher costs, but the company is able to offset these with price adjustments.
Looking ahead, the StockStory team will be monitoring (1) the pace at which AZZ’s new Missouri coil coating plant ramps up production and contributes to margins, (2) the successful execution and integration of planned bolt-on acquisitions, and (3) any further impacts or adjustments stemming from tariffs and input cost pressures. Progress on infrastructure spending and the company’s ability to maintain or expand market share will also be central to our ongoing analysis.
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