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Category: AZZ Incorporated (AZZ)
Date: 11 January 2021 Stock price of AZZ Inc (AZZ): $49.90 We take a look at the 3rd quarter 2021 earnings report of AZZ Incorporated, a global provider of metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services to the markets of power generation, transmission, distribution and industrial in protecting metal and electrical systems used to build and enhance the world’s infrastructure
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Tom Ferguson, President and Chief Executive Officer of AZZ -During the third quarter, the COVID-19 pandemic continued to significantly impact our operations and financial results. Despite the challenging global macroeconomic environment, we achieved sequential operating performance improvement as our businesses steadily adapted to operating in the current environment. "
More About AZZ Incorporated
AZZ Inc. is a global provider of metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services to the markets of power generation, transmission, distribution and industrial in protecting metal and electrical systems used to build and enhance the world’s infrastructure. AZZ Metal Coatings is a leading provider of metal finishing solutions for corrosion protection, including hot dip galvanizing to the North American steel fabrication industry. AZZ Infrastructure Solutions (formerly Energy) is dedicated to delivering safe and reliable transmission of power from generation sources to end customers, and automated weld overlay solutions for corrosion and erosion mitigation to critical infrastructure in the energy markets worldwide.
Overview of AZZ Inc (AZZ) 3rd quarter 2021 earnings report
Third Quarter Overview and Recent Highlights:
- Earnings per share of $0.76 and net income of $19.7 million; which includes net charges of $1.6 million, or $0.06 cents per share, primarily related to the loss on the divestiture of Southern Mechanical Services (SMS).
- Sales of $226.6 million, increased sequentially by 11.4% from the second quarter
- Metal Coatings segment results versus same quarter, prior year:
- Sales of $115.6 million, down 10.5%, with galvanizing sales down 8.8%
- Operating income of $28.7 million, up 5.2%
- Operating margin of 24.8%, versus 21.1%, or 370 bps improvement
- Infrastructure Solutions segment results versus same quarter, prior year:
- Sales of $111.0 million up 28.6% sequentially; down 31.5%
- Operating income of $8.7 million, down 49.9%
- Operating margin of 7.9% versus 10.8%
- Metal Coatings segment results versus same quarter, prior year:
- Acquisition of Acme Galvanizing to continue strategic emphasis on Metal Coatings
- Repurchased over 652,000 shares during the quarter.
- Board authorized a new $100 million share repurchase program
AZZ Inc (AZZ) management commentary 3rd quarter 2021 earnings report
January 11, 2021 - FORT WORTH, TX - AZZ Inc. (NYSE: AZZ), a global provider of metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services today announced financial results for the third quarter of fiscal year 2021, ended November 30, 2020.
Tom Ferguson, President and Chief Executive Officer of AZZ, commented, “During the third quarter, the COVID-19 pandemic continued to significantly impact our operations and financial results. Despite the challenging global macroeconomic environment, we achieved sequential operating performance improvement as our businesses steadily adapted to operating in the current environment. We were able to maintain solid profitability with sales of $226.6 million and net income of $19.7 million, or $0.76 per diluted share, and return capital to our shareholders by purchasing more than 652,000 AZZ common shares in the open market during the third quarter. I am pleased that our Metal Coatings segment continues to deliver solid operating results with sales of $115.6 million, and operating margins of 24.8%, an improvement of 370 basis points over the same quarter the prior year. Within our Infrastructure Solutions segment, we experienced mixed results. Endmarket demand for medium voltage switchgear continues to exceed prior year results, while electrical enclosure orders were consistent with the third quarter of last year. However, the ongoing impact of pandemic-related travel restrictions, coupled with the effects of weak oil demand, has resulted in significantly lower refining turnaround projects as customers continued to delay or defer maintenance. We are cautiously optimistic for improvement in the refining market, and are positioning our welding solutions operations for a solid fiscal year 2022. We are already seeing signs of improvement including earlier and increased quoting activity for the 2021 spring turnaround season.
Tom Ferguson, President and Chief Executive Officer of AZZ, commented, “During the third quarter, the COVID-19 pandemic continued to significantly impact our operations and financial results. Despite the challenging global macroeconomic environment, we achieved sequential operating performance improvement as our businesses steadily adapted to operating in the current environment. We were able to maintain solid profitability with sales of $226.6 million and net income of $19.7 million, or $0.76 per diluted share, and return capital to our shareholders by purchasing more than 652,000 AZZ common shares in the open market during the third quarter. I am pleased that our Metal Coatings segment continues to deliver solid operating results with sales of $115.6 million, and operating margins of 24.8%, an improvement of 370 basis points over the same quarter the prior year. Within our Infrastructure Solutions segment, we experienced mixed results. Endmarket demand for medium voltage switchgear continues to exceed prior year results, while electrical enclosure orders were consistent with the third quarter of last year. However, the ongoing impact of pandemic-related travel restrictions, coupled with the effects of weak oil demand, has resulted in significantly lower refining turnaround projects as customers continued to delay or defer maintenance. We are cautiously optimistic for improvement in the refining market, and are positioning our welding solutions operations for a solid fiscal year 2022. We are already seeing signs of improvement including earlier and increased quoting activity for the 2021 spring turnaround season.
As we previously communicated during the quarter, due to shifting industry and customer dynamics, and the protracted impact from the COVID-19 pandemic, we are taking the necessary steps to strategically restructure our portfolio of businesses to become a focused metal coatings business. As part of this process, we previously announced several actions including the divestiture of SMS, for which we recorded a loss on the sale of subsidiary of $1.9 million, the recent acquisition of Acme Galvanizing as part of our strategy to continue to grow Metal Coatings, and a comprehensive Board-led review of our businesses with the assistance of leading independent financial, legal and tax advisors. Our review of the Infrastructure Solutions businesses and associated assets, and the exploration of additional capital allocation opportunities to maximize shareholder value, is ongoing and I am pleased with the progress the team has made during the quarter.
I am extremely proud of AZZ's resiliency and execution as we continue to navigate the pandemic and again I want to express my sincere gratitude to all our employees for their hard work and dedication during this unprecedented time. We expect to emerge from this year a much stronger company, well positioned to excel in the post-COVID era.”
Fiscal Year 2021 Guidance
Mr. Ferguson added, “Given the ongoing disruption from COVID-19 we will continue to suspend our guidance for fiscal 2021. Based upon the evaluation of information currently available to management, we anticipate fiscal 2021 fourth quarter financial results to exceed the fiscal 2020 fourth quarter adjusted earnings per share of $0.47 per diluted share, but we expect fourth quarter results to be below the third quarter results. We continue to experience COVID-related travel restrictions within certain geographical areas served by our Infrastructure Solutions teams, particularly in some key international markets where we have projects scheduled for completion during the fourth quarter.
The strong cash flow generated by our operations will continue to help the Company manage both debt and liquidity effectively throughout the remainder of fiscal 2021, and well beyond. We continue to be prudent with our use of cash by focusing capital expenditures on core growth initiatives and safety related spending, reducing debt, and repurchasing shares to enhance shareholder value. We will also continue to carefully manage our workforce to ensure a safe and healthy operating environment, and adjust our capacity to match the fluidity of our customer demands. We are focused on executing the following opportunities: fully integrate the recently announced acquisition of Acme Galvanizing to drive market share growth and operating efficiencies; build backlog in our Infrastructure Solutions segment; complete additional acquisitions and dispositions in support of our strategic initiatives and efficiently manage our liquidity to ensure we enter fiscal year 2022 in a solid position.”
I am extremely proud of AZZ's resiliency and execution as we continue to navigate the pandemic and again I want to express my sincere gratitude to all our employees for their hard work and dedication during this unprecedented time. We expect to emerge from this year a much stronger company, well positioned to excel in the post-COVID era.”
Fiscal Year 2021 Guidance
Mr. Ferguson added, “Given the ongoing disruption from COVID-19 we will continue to suspend our guidance for fiscal 2021. Based upon the evaluation of information currently available to management, we anticipate fiscal 2021 fourth quarter financial results to exceed the fiscal 2020 fourth quarter adjusted earnings per share of $0.47 per diluted share, but we expect fourth quarter results to be below the third quarter results. We continue to experience COVID-related travel restrictions within certain geographical areas served by our Infrastructure Solutions teams, particularly in some key international markets where we have projects scheduled for completion during the fourth quarter.
The strong cash flow generated by our operations will continue to help the Company manage both debt and liquidity effectively throughout the remainder of fiscal 2021, and well beyond. We continue to be prudent with our use of cash by focusing capital expenditures on core growth initiatives and safety related spending, reducing debt, and repurchasing shares to enhance shareholder value. We will also continue to carefully manage our workforce to ensure a safe and healthy operating environment, and adjust our capacity to match the fluidity of our customer demands. We are focused on executing the following opportunities: fully integrate the recently announced acquisition of Acme Galvanizing to drive market share growth and operating efficiencies; build backlog in our Infrastructure Solutions segment; complete additional acquisitions and dispositions in support of our strategic initiatives and efficiently manage our liquidity to ensure we enter fiscal year 2022 in a solid position.”
AZZ Inc (AZZ) stock price history over the last 5 years
The image below shows the stock price history of AZZ Incorporated (AZZ) over the last 5 years. And its not been a good time for AZZ stockholders with the stock increasing by only 1.4% over the last 5 years.
The stock of AZZ is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of AZZ stock is positive at this point.
The stock of AZZ is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of AZZ stock is positive at this point.
Latest stock valuation of AZZ Inc (AZZ)
So what is AZZ Inc stock worth based on their 1st quarter 2021 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for AZZ Inc at $44.10 a stock
We therefore believe the stock of AZZ Inc is overvalued at its current price of $49.90
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $44.10, thus a good entry point into AZZ Inc would be at $39.70 or below.
We expect the stock of AZZ Inc to pull back from its current price to levels closer to our target price in coming weeks and months, Since the stock of AZZ is trading at well above our suggested entry point we rate the stock of AZZ Inc (AZZ) as a sell
We therefore believe the stock of AZZ Inc is overvalued at its current price of $49.90
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $44.10, thus a good entry point into AZZ Inc would be at $39.70 or below.
We expect the stock of AZZ Inc to pull back from its current price to levels closer to our target price in coming weeks and months, Since the stock of AZZ is trading at well above our suggested entry point we rate the stock of AZZ Inc (AZZ) as a sell
Next earnings release of AZZ Inc (AZZ)
It is expected that AZZ Inc (AZZ).will release their 4th quarter 2021 earnings report in early April 2021
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