AZZ Inc. (NYSE: AZZ) recently displayed impressive resilience in the stock market, with a modest 0.90% increase during regular trading hours, closing at $45.90. However, what truly captured investor attention was the remarkable 3.86% surge in AZZ stock to $47.67 in after-hours trading, following the release of AZZ’s Q2 2023 financial results.
AZZ Inc. (AZZ) has just unveiled its second-quarter financial report for the period ending August 31, 2023, and the results have met expectations, instilling optimism for the remainder of the fiscal year. Despite facing challenging market conditions, particularly in the construction and appliance sectors, AZZ managed to achieve an impressive EBITDA margin exceeding 20%. This feat was primarily accomplished by sharpening the focus on profitability.
The standout performer in their portfolio is the Metal Coatings division, which thrived due to increased infrastructure spending. This sector achieved exceptional results, boasting record-breaking sales, remarkable operating income, and a remarkable EBITDA margin exceeding 30%.
In Q2, AZZ achieved $398.5 million in sales, just a marginal 2.0% dip from the prior year. AZZ showcased an upward trend in Earnings per share (EPS) with diluted EPS at $0.97, a 4.3% increase YoY. Adjusted EPS hit $1.27, marking a 5.0% growth. Net income at AZZ surged impressively by 12.8%, reaching $28.3 million, and adjusted net income reached $37.2 million, a 5.5% rise.
AZZ’s prudent financial approach is evident in the $40.0 million debt reduction, resulting in a net leverage ratio of 3.4x. Additionally, they secured more favorable interest rates through a repricing of their term loan B. The construction of their new plant in Washington, Missouri, progressed ahead of schedule and below budget, and AZZ chose to fund it internally, showcasing their robust cash flow generation capabilities.
Looking ahead, AZZ Inc (AZZ) plans to continue debt reduction by $75 to $100 million throughout the year while maintaining quarterly cash dividends. Despite anticipating a somewhat slower second half of the year, AZZ is optimistic about future performance, driven by positive trends in infrastructure and renewable energy investments, reshoring of manufacturing operations, and a shift towards eco-friendly pre-painted steel and aluminum.
