AZZ Raises Fiscal 2027 Outlook After Record Q2 Sales

On Wednesday, AZZ (NYSE: AZZ ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

7% year-over-year, driven by strong performance in Metal Coatings and Precoat Metals segments. , enhancing its presence in the Pacific Northwest, and initiated a new greenfield plant in Tulsa to support infrastructure demand. 30. 5% increase in Precoat Metals, with significant contributions from the Washington, Missouri facility.

The company emphasized strategic growth through disciplined acquisitions, organic investments, and leveraging technology to enhance operational efficiency. AZZ plans to reduce debt by $100 million to $140 million during the fiscal year and continues to focus on shareholder returns through stock repurchases and dividends. Full Transcript OPERATOR Good day and welcome to the AZZ Incorporated Second Quarter Fiscal Year 2027 Earnings Conference Call and webcast. All participants will be in listen-only mode.

Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions. To ask a question you may press star then one on a touch-tone phone. To withdraw your question please press star then two.

Please note this event is being recorded. I would now like to turn the conference over to Philip Cooper with Three Part Advisors. Please go ahead. Philip Cooper, Three Part Advisors Good morning.

Thank you for joining us today to review AZZ's fiscal 2027 second quarter results for the period ended August 31, 2026. Joining the call today are Tom Ferguson, President and Chief Executive Officer; Jason Crawford, Chief Financial Officer; and David Nark, Chief Marketing, Communications and Investor Relations Officer. After today's prepared remarks, we will open the call for questions. Please note that the live webcast of today's call is available at Before we begin, I would like to remind everyone that our discussion today will include forward-looking statements made in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

By their nature, forward-looking statements are uncertain and outside the Company's control, except for actual results. AZZ's comments containing forward-looking statements may involve risks and uncertainties, some of which are detailed from time to time in documents filed by AZZ with the Securities and Exchange Commission, including the latest annual report on Form 10-K. These statements are not guarantees of future performance; therefore, undue reliance should not be placed upon them. Actual results could differ materially from these expectations.

In addition, today's call will discuss non-GAAP financial measures which should be considered supplemental and not as a substitute for GAAP financial measures. We refer shareholders to our reconciliations from GAAP to non-GAAP measures contained in today's earnings press release. I would now like to turn the call over to Tom Ferguson. Tom Ferguson, President & CEO Thank you, Philip, and good morning.

7% from the prior year, reflecting strong execution, a resilient business model and the strength of our growth strategy. Our performance and market demand continue to validate the investments we made to expand capacity, strengthen customer partnerships and enhance our market positions. Segments achieved record quarterly sales. 9%, driven by higher volumes across the construction, industrial, infrastructure and transportation end markets along with inflationary price increases passed through by our team.

7%, benefiting from operating leverage on record sales and volume. While LME zinc prices have increased, our pricing model and associated surcharge mechanisms continue to mitigate raw material price volatility. 5%, driven by volume growth from the continued ramp of our Washington, Missouri facility and value-added pricing initiatives, primarily to offset inflationary pressures on paint and other items. 2%, reflecting higher throughput and solid operational execution.

, establishing AZZ's presence in the Pacific Northwest. This acquisition expands our position in an attractive region that is experiencing favorable demand in the infrastructure, industrial and construction markets. The acquisition adds a high-quality multi-site platform including the region's largest hot-dip galvanizing kettle and a new spin galvanizing facility, extending our footprint into a new five-state region. Our growth strategy balances disciplined acquisitions with value-accretive organic investments that strengthen our competitive position in Metal Coatings.

We continue to expand capacity where demand fundamentals remain strong and returns are attractive. Our recently expanded Crowley, Texas facility is providing additional capacity in a strong growth market, reinforcing our ability to capture demand and generate attractive returns on invested capital. S. end market demand in more detail in a moment.

We have also initiated a new greenfield hot-dip galvanizing plant in the Tulsa area linked to a major anchor customer. We have other greenfields in the works and hope to be able to discuss those in more detail later this fiscal year. The strength in infrastructure and the long-term outlook is creating opportunities for us to partner with major customers as they expand their capacity. We also continue to advance strategic business development initiatives through our de-verticalization opportunities.

These partnerships allow manufacturers to divest non-core galvanizing and coil coating operations while securing a long-term relationship with AZZ. These opportunities offer AZZ a capital-efficient pathway to expand capacity, deepen customer relationships and gain market share. Our pipeline remains active and provides a meaningful opportunity for future value creation. At Precoat Metals, the Washington, Missouri facility continues to ramp as planned.

We remain on track to reach targeted utilization levels with our strategic partner while commercializing the remaining capacity. The facility has already achieved its expected contribution margin targets for the year and performance within the beer and beverage packaging category remains solid. Washington has already become an important contributor to Precoat's future earnings growth and we look forward to its continued progress. Technology remains a key enabler of our strategy.

We are leveraging AI and proprietary digital tools to enhance productivity, improve operational efficiency and scale our businesses more effectively. By integrating AI into our enterprise platforms, we are streamlining software development and operational workflows while accelerating better data-driven decisions across both segments. Our digital platforms are increasing visibility and improving operational consistency. Our Metal Coatings Digital Galvanizing system and Precoat Metals Coil Zone platform strengthen customer experience while reinforcing our competitive advantages and operational excellence.

We will continue investing in value-accretive opportunities, allocating capital with discipline, expanding our market leadership and delivering exceptional customer service. With a strong balance sheet, differentiated capabilities and a proven operating model, we believe we have the right platform to benefit from the long-term investment trends shaping our end markets. These trends provide a meaningful opportunity to drive profitable growth and create long-term shareholder value. With that, I'll turn it over to Jason.

Jason Crawford, SVP & CFO Thank you, Tom. 7% year over year, with double-digit growth in both operating segments. 8 million of operating cash flow. 9%, reflecting continued momentum in the construction and industrial end markets.

5%, driven by higher coil coating volume, the continued ramp-up of the Washington, Missouri facility, and pricing actions in response to higher material input costs. These gains were partially offset by softer volume in the HVAC and appliance end markets. 1% of sales, representing an 80 basis point improvement year over year. This reflects favorable mix, pricing discipline, and improved operational execution.

9% of sales, which was flat against last year's quarter. 3%, reflecting operating leverage on higher revenue. 2% of sales, an improvement of 80 basis points versus the prior year, reflecting strong operational execution and leverage on higher volumes. 3 million in total equity in earnings, a substantial portion of which was attributable to the remaining gain recorded on the divestiture of the Electrical Products Group.

3 million of equity in earnings related to the sale of the lighting business. 7 million in our cash flow statement after accounting for taxes paid by AVAIL on behalf of AZZ. Our JV partner continues to pursue the divestiture of its remaining assets, which operationally now consist of the Welding Solutions Brazil business. 9 million from the prior year, driven by deliberate debt reduction and capital market initiatives discussed in more detail in our SEC filings.

The lower interest expense reflects our continued focus on managing our overall cost of capital and strengthening our balance sheet. 9% last year. Last year's lower tax rate was due to an increase in R&D tax credits attributable to the technology spend on the new-build Washington, Missouri facility. 00, up 29% year over year.

The increase reflects the combination of revenue growth, margin expansion, and lower interest expense. 8% of sales. 1 million in the current quarter, further reflecting the impact of divestitures in the AVAIL JV. 2%, supported by operational performance and product mix from our Washington, Missouri facility.

Volumes at the facility continued to ramp in line with expectations, and we remain on track for it to continue to contribute meaningfully to segment revenue and profitability in the second half of fiscal 2027. 8 million of operating cash flow during the quarter, demonstrating the fundamentals of our business model in converting EBITDA into cash and strong working capital execution. 4 million, providing ample flexibility to fund both organic and inorganic growth opportunities. As noted, we completed the acquisition of Seattle Galvanizing during the quarter, establishing our Metal Coatings presence in the Pacific Northwest.

This transaction expands our geographic coverage and customer service capabilities while providing a premier platform for future growth. We continue to evaluate a healthy acquisition pipeline across both segments against our strategic and financial criteria. Our balance sheet remains a distinct competitive advantage. 3 times trailing twelve-month adjusted EBITDA.

5 million, with a growing focus on high-return organic investments. Capital allocation priorities continue to include returning capital to shareholders while investing for future growth. 24 per share, and completed the Seattle Galvanizing strategic acquisition. These actions demonstrate the strength of our cash generation, the flexibility of our balance sheet, and our commitment to creating long-term shareholder value.

Overall, the quarter reflected strong execution, margin expansion, cash generation, and disciplined capital deployment. With that, I will turn the call over to David. David Nark (Chief Marketing, Communications and Investor Relations Officer) Thank you, Jason. Good morning, everyone.

7% reflects broad-based strength across our end markets. 6% on strong utility-scale power demand. 2%, supported by electrical and transmission and distribution activity, and transportation—namely bus and semi-trailer activity—increased approximately 4%. Container sales rose 153%, benefiting from the performance at our Washington, Missouri facility.

Somewhat offsetting these gains were HVAC and appliance markets, which remained soft in the quarter, collectively declining 10% due to the continued weakness in new residential construction. Looking ahead, industry forecasts and customer activity continue to support a constructive outlook for investment across our end markets over the coming years. S. utility capital investment between 2026 and 2030, including more than $500 billion dedicated to transmission and distribution infrastructure.

25 billion investment focused on transmission upgrades, reconductoring, and grid-enhancing technologies. These projects are expected to unlock more than 23 gigawatts of additional capacity while accelerating the modernization of the nation's electric grid. We continue to see investments translate into tangible customer demand. For example, one major utility structure customer has reported that backlog growth has accelerated from approximately 35% earlier this year to 44% in its most recent quarter.

This momentum, along with sustained order activity throughout the grid infrastructure value chain, supports our positive long-term outlook for many of our end markets. With that, I will turn the call over to Tom. Tom Ferguson, President & CEO Thank you, Dave. As you've heard today, our record second-quarter performance reflects the strength of our business model, the benefits of our strategic investments, and the exceptional execution by our employees.

Across AZZ, we continue to see healthy demand across our core construction, industrial, and infrastructure markets, supported by powerful long-term trends in grid modernization, electrification, manufacturing expansion, and domestic infrastructure investment. Combined with our expanding geographic footprint, growing capacity, digital capabilities, and strong customer relationships, we believe AZZ is well positioned to capitalize on these opportunities and extend its market leadership. Reflecting our strong first-half performance and confidence in the underlying fundamentals of the business, we are raising our fiscal 2027 outlook. 30.

We also expect to reduce debt by $100 million to $140 million during fiscal 2027, further strengthening an already strong balance sheet, and will continue to opportunistically purchase shares of AZZ stock. Looking ahead, we remain confident in our outlook and focused on executing strategic priorities which remain clear: execute safely and efficiently, serve our customers, drive profitable growth, allocate capital with discipline, and create long-term value for our shareholders.