AZZ Q2 profit jumps 15%, yet misses estimates

AZZ Inc. (AZZ) reported a 15% jump in earnings for the second quarter driven by strengths in its Energy and Metal Coatings segments. The electrical equipment maker raised its revenue outlook and tightened its earnings estimate for the full year 2019. However, the top and bottom line for the quarter came in below analysts’ expectations.

Net income for the quarter increased 15% to $11.24 million and earnings rose 13.1% to $0.43 per share. The results were positively impacted by the contributions from both its recent acquisitions of Powergrid switchgear and Lectrus electrical enclosure businesses.

Revenue grew 13.5% to $222.8 million, helped by strengths in both its Energy and Metal Coatings segments. Revenue from the Energy segment increased by 9.5% year-over-year, while revenue from the Metal Coatings segment grew by 17.4%. Bookings climbed 33.6% to $253.9 million.

Gross margins declined to 21.1% from 22.3% a year ago, and operating margin fell to 7.7% from 8.9% a year earlier. Lower margins were driven by a charge taken this quarter to consolidate two galvanizing plants into one in the Gulf Coast region, focus on growing market share, and having peak zinc costs flowing through its kettles.

Looking forward into the fiscal year 2019, the company narrowed its earnings guidance to the range of $1.90 to $2.25 per share from the prior estimate of $1.75 to $2.25 per share. Annual sales outlook was raised to the range of $930 million to $970 million from the prior forecast of $900 million to $960 million.

Executive chief Tom Ferguson said the company remained somewhat cautious due to the uncertainty related to tariffs and the Chinese trade situation, as well as the tighter market for labor, but is optimistic about the full year.

Incoming orders for the second quarter were $253.9 million, up from $190.1 million a year earlier. Book to revenue ratio increased to 1.14 from 0.97. The company’s backlog at the end of the second quarter of the fiscal year 2019 increased 12% to $336 million. About 54% of the current backlog is expected to be delivered outside the US, compared to 42% in the previous year quarter.

Shares of AZZ ended Monday’s regular session up 1.59% at $48.67 on the NYSE. The stock had fallen over 4% in the year so far, while it had risen more than 5% for the past year.