AZZ Inc. earnings recap
Q2 FY2027, reported October 13, 2026 · Beat 6 of last 7 quarters
AZZ Inc. reported Q2 FY2027 revenue of $487M, a beat of 4.2% against consensus, and EPS of $2.00, a beat of 6.4%.
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AZZ is an upstream coating and galvanizing supplier into the steel-intensive parts of the AI infrastructure buildout, and this quarter's demand came largely from grid and industrial work rather than data centers directly, which management characterized as a nice tailwind but still a small portion of total business. The $1.3 trillion of projected U.S. utility capital investment between 2026 and 2030 and the DOE's 31-project, $5.25 billion grid modernization initiative were cited as the structural drivers behind construction, industrial and infrastructure growth, with capacity additions tied to specific anchor customers expanding their own footprints. Persistent tightness in coated steel substrate could act as a gating factor on how quickly that buildout converts into coated product.
| Estimate | Actual | vs est | ||
|---|---|---|---|---|
| Revenue | $463M | $487M | +4.2% | beat |
| EPS | $1.86 | $2.00 | +6.4% | beat |
AZZ reported record second quarter sales of $486.9 million, up 16.7% year over year, with Metal Coatings sales up 22.9% and Precoat Metals sales up 11.5%. Gross profit was $122.1 million, or 25.1% of sales, an 80 basis point improvement, operating income rose to $83.8 million (17.2% of sales), and adjusted diluted EPS increased 29% to $2.00. Consolidated adjusted EBITDA was $110.9 million, or 22.8% of sales, with Metal Coatings segment adjusted EBITDA margin at 30.7% and Precoat expanding 100 basis points to 21.2%. The quarter included the acquisition of Seattle Galvanizing, a $20 million share repurchase at an average price of $146.71 per share, a quarterly dividend increase to $0.24 per share, $18.5 million of capital expenditures and $102.8 million of operating cash flow. Debt was reduced by $15 million, ending the quarter at 1.3x net leverage, and the company recorded $7.3 million of equity in earnings from the sale of the lighting business within the Avail JV alongside an $18.2 million cash distribution.
Management raised its fiscal 2027 outlook, now guiding to sales of $1.825 billion to $1.875 billion, adjusted EBITDA of $380 million to $420 million and adjusted diluted EPS of $7.20 to $7.30. The company also said it now expects to reduce debt by $100 million to $140 million in fiscal 27, down from a prior $130 million to $170 million, which CFO Jason Crawford attributed entirely to the $57.5 million Seattle Galvanizing acquisition plus the timing of Avail-related cash. On capacity, management said several brownfield/greenfield galvanizing projects tied to anchor customers are in the works at roughly $35 million to $50 million each, alongside a steady cadence of sub-$10 million kettle and coating-line expansions, with the Pacific Northwest flagged as ripe for further consolidation. Precoat's Washington, Missouri facility is expected to reach its 75% anchor-customer utilization target by the end of the year and to become the fourth-largest site in the fleet. Management expects fiscal Q4 gross margins to track historical seasonality and said Metal Coatings price increases will flow through more fully in the second half, while calling winter weather the main swing factor for the fourth quarter and describing its stance as still somewhat conservative until the weather picture clears after Q3.
“Reflecting our strong first half performance and confidence in the underlying fundamentals of the business, we are raising our fiscal 27 outlook. We now expect sales of $1.825 billion to $1.875 billion adjusted EBITDA of $380 million to $420 million and adjusted diluted EPS of $7.20 to $7.30.”
on Guidance raise
“it is coming about because of the increased capacity to the high demand on infrastructure. So this is not so much to serve existing capacity. it is where some large customers, particularly in the infrastructure industrial side, are adding capacity and we are aligning ourselves with them.”
on Greenfield and brownfield capacity
“it is 1 of the tightest substrate markets since 2021. Section 32 running at 50% is not certainly helping things. it is taken out, you know, a lot of steel out of the market.”
on Substrate tightness
What drove the second quarter upside, and why does the raised full-year guidance leave the back half relatively intact versus prior expectations?
Tom Ferguson attributed the upside to the Seattle Galvanizing acquisition performing well and being rolled into guidance, plus both segments executing on volumes and demand, with Metal Coatings benefiting from infrastructure and industrial spend across many parts of the country. He said pricing has flowed through and zinc LME surcharges are in place to protect against raw material volatility, but flagged winter weather in the fourth quarter as the key uncertainty because hard freezes or storms cost working days, leaving management somewhat conservative until it gets a clearer read after the third quarter.
Given tight flat-rolled supply, what mechanisms does AZZ have to ensure sufficient galvanized substrate, and is the company importing to fill gaps?
Tom Ferguson explained that AZZ does not buy substrate itself — the inventory in its warehouses is customer-owned material being stored before or after coating. He said AZZ's teams work with distributors, suppliers, service centers and mills to connect customers with available substrate, that the market is tight especially for galvanized sheet and has been tight all year, and that this sourcing help is part of AZZ's value add. Jason Crawford added that Precoat's business model lets it warehouse customer material, so customers can take advantage of windows when substrate availability or imports open up.
Can you elaborate on the Tulsa greenfield and the other greenfield galvanizing opportunities — is there an underlying trend driving them?
Tom Ferguson said the Tulsa project is really a brownfield adjacent to an existing facility, driven by customers adding capacity in the infrastructure and industrial markets rather than by existing demand, and that AZZ is aligning itself with major customers that are expanding. He said two or three other opportunities are in the works, some in new areas and some where AZZ already has capacity, and that new state-of-the-art plants will be more efficient and productive. He put the investment at $35 million to $50 million depending on whether it is a large structural plant or a general-use plant and on real estate values, and noted anchor customers — similar to the Washington, Missouri arrangement — give confidence in the ramp.