AZZ shares fall 12% after Q2 earnings miss expectations despite strong profit growth

Shares of AZZ Inc. fell on Thursday after the company reported lower-than-expected fiscal second-quarter results, with sales pressured by weak demand across several of its key end markets.

The stock declined 12.1% to intraday low of $92.98, through the stock has regained some of the losses, trading at $101.30 at the time of writing.

The company posted a sharp rise in quarterly profit compared with the prior year.

Through Wednesday’s close, AZZ shares were up 30% over the past 12 months.

The Fort Worth, Texas-based provider of hot-dip galvanizing and coil-coating solutions said late Wednesday that adjusted earnings came in at $1.55 per share on revenue of $417.3 million for the quarter ended August 31.

Analysts surveyed by FactSet had forecast adjusted earnings of $1.57 per share on revenue of $426.6 million, meaning both figures narrowly missed Wall Street’s expectations.

Despite the shortfall, AZZ’s quarterly profit more than doubled to $89.3 million, up from $35.4 million a year earlier, underscoring the company’s ability to improve margins even in the face of soft demand.

Weakness in precoat-metals unit weighs on revenue

Chief Executive Tom Ferguson said that AZZ’s precoat-metals segment faced headwinds from a slowdown in several end markets, including building construction, heating, ventilation and air conditioning (HVAC), and appliances.

Sales in the division dropped 4.3% to $227.3 million during the quarter, as orders from these industries declined amid broader economic uncertainty.

The company said the weakness in its precoat-metals business was partly offset by stronger performance in metal coatings, which benefited from increased demand tied to infrastructure-related spending.

AZZ’s metal coatings sales climbed 11%, driven by higher volumes in construction, industrial, and electrical transmission and distribution markets.

Outlook maintained despite near-term headwinds

Looking ahead, AZZ maintained its full-year guidance, signaling confidence in its operational performance.

The company continues to project adjusted earnings per share between $5.75 and $6.25 and annual sales in the range of $1.63 billion to $1.73 billion.

The reaffirmed outlook suggests that management expects demand to stabilize in the second half of the fiscal year, supported by public and industrial infrastructure spending.

AZZ’s latest results also come against the backdrop of changing analyst expectations.

Over the past three months, the mean earnings estimate among analysts has fallen by about 1.1%, reflecting more cautious sentiment.

Within the last 30 days, three analysts have revised their earnings estimates downward.

Analysts maintain buy ratings despite short-term volatility

Despite the earnings miss, Wall Street remains broadly positive on AZZ.

The stock holds an average “buy” rating, with seven analysts assigning “strong buy” or “buy” recommendations and four rating it as a “hold.”

No analysts currently rate the stock as a “sell” or “strong sell.”

The median 12-month price target for AZZ stands at $126.50, representing an upside of about 16.3% from the company’s most recent closing price of $105.94 on Wednesday.

While shares fell sharply following the quarterly report, AZZ’s long-term performance remains robust, with a 28.3% gain year-to-date and a track record of consistent profitability.

For now, investors appear focused on near-term demand softness, even as the company continues to benefit from structural trends in infrastructure investment and industrial production.