TLDR
- AZZ Beats on Earnings, But After-Hours Drop Follows Mixed Segment Results
- Metal Coatings Shine as Precoat Falters; AZZ Reaffirms FY2026 Guidance
- Strong Cash Flow, Stable Outlook Can’t Stop AZZ Stock’s Post-Earnings Slip
- AZZ Grows Sales and Cash, But Precoat Drag Spurs After-Hours Stock Dip
- Metal Coatings Surge Boosts AZZ Margins, Market Reacts to Precoat Weakness
AZZ Inc. closed at $105.94, rising 0.82% during regular hours, before slipping 4.91% to $100.74 after hours.
The drop followed the release of second-quarter results for fiscal year 2026. However, the report highlighted strong earnings, rising cash flow, and an unchanged full-year outlook.
Metal Coatings Strength Drives Top-Line Growth
AZZ generated $417.3 million in total sales, marking a 2.0% increase from the previous year’s second quarter. Metal Coatings sales surged 10.8% to $190.0 million, benefiting from infrastructure-related demand across construction and utility markets. This growth supported a segment-adjusted EBITDA of $58.5 million, achieving a 30.8% margin despite a 90-basis-point decline.
The company attributed the sales rise to higher volumes, particularly in electrical transmission, industrial, and solar sectors. Although the EBITDA margin slipped slightly, the segment continued to deliver consistent profitability. The acquisition of a new galvanizing plant in Canton, Ohio further supported capacity expansion and market reach.
AZZ noted that infrastructure investment and utility upgrades were key contributors to the segment’s outperformance. With these projects continuing, the Metal Coatings business remains a cornerstone of revenue and margin stability. The company plans to build further on this growth through disciplined capital deployment.
Precoat Metals Sees Pressure Amid Weak End-Market Demand
Precoat Metals reported $227.3 million in revenue, reflecting a 4.3% decline compared to the previous year’s second quarter. The business faced slower activity in building construction, HVAC, and appliances, driving EBITDA margins down to 20.2%. Segment EBITDA came in at $45.9 million, also reflecting a 90-basis-point contraction.
Management emphasized that softness in key downstream markets weighed on overall volumes. However, it maintained that the segment continues to deliver value with steady margins and operational efficiency. As market cycles evolve, Precoat Metals remains positioned for recovery and long-term resilience.
While the short-term outlook remains mixed for this segment, AZZ has not adjusted its guidance. Instead, it will focus on managing costs and optimizing production to support consistent profitability. Any rebound in construction-related demand could lift segment performance in the second half of the fiscal year.
Robust Cash Flow and Steady Guidance Highlight Financial Discipline
AZZ posted a sharp rise in net income to $89.3 million, a 152.3% year-over-year increase, with adjusted EPS climbing 13.1% to $1.55. Operating cash flow reached $58.4 million for the quarter, up 23% from last year, aiding strategic debt repayment and dividend payout. The company paid a quarterly dividend of $0.20 per share while maintaining a 1.7x net debt leverage.
Capital expenditures totaled $40.2 million for the first half of the year, with full-year spending projected between $60–$80 million. AZZ also completed a $30.1 million acquisition during the quarter, aligning with its M&A strategy focused on high-quality assets. Additionally, a new receivables securitization program and loan repricing reduced interest costs.
The company reaffirmed its FY2026 guidance, targeting sales between $1.625 billion and $1.725 billion and adjusted EPS between $5.75 and $6.25. With stable margins and strong free cash flow, AZZ expects to meet its full-year goals despite near-term segment variability. Management remains committed to capital discipline and strategic growth execution.
