Earnings preview: What to expect from AZZ Q1 2020 results

AZZ Inc. (NYSE: AZZ) is set to release its earnings results for the first quarter of fiscal 2020 on Monday before the market opens. The galvanizing and metal coating services provider is likely to encounter moderate cyclical headwinds in commodity prices, labor costs, and the continuing secular downturn in the domestic nuclear business.

However, the company is expected to experience a resurgence in demand for galvanizing services, refinery, and international projects for the Energy Segment. AZZ will continue on the last year’s development of end-markets by integrating acquisitions made during the past year of Powergrid Solutions, Enhanced Powder Coating, and Rogers Brothers.

AZZ expects its investments in digital galvanizing systems are paying off and its powder coating and galvanized rebar businesses continued to grow. The company expects to gain measurable traction from the strategic growth initiatives of organic growth investments, aggressive operational efficiencies, and active M&A program throughout fiscal 2020.

Analysts expect the company’s earnings to increase by 13.30% to $0.68 per share and revenue will rise by 5.70% to $277.19 million for the first quarter. In comparison, during the previous year quarter, the company posted a profit of $0.60 per share on revenue of $262.24 million. The company has missed analysts’ expectations thrice in the past four quarters.

For the fourth quarter, the company’s results were hurt by a delay in shipping the first part of a major order from its high-voltage bus business into China. However, AZZ began shipping this order during the first quarter of fiscal 2020. The company experienced a normal level of turnaround activity. The company said zinc costs in kettles did not decline as quickly as expected, creating a drag on margins in its galvanizing during the quarter.

Looking ahead into fiscal 2020, the company is seeing signs of improvement from stronger markets in specialty welding and more normalized margins as it continues to grow its Electrical platform. Also, AZZ sees improving market activity in North American refinery turnarounds and the results will be benefited from its sales and market development efforts in Metal Coatings for the full year.

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The company reaffirmed its fiscal 2020 earnings guidance in the range of $2.25 to $2.75 per share and its annual sales outlook in the range of $0.95 billion to $1.03 billion. The company is optimistic for a much improved fiscal 2020 with the expanded market dynamics as it has taken the necessary actions to improve operating performance.

Shares of AZZ ended Wednesday’s session down 0.68% at $45.42 on the NYSE. The stock has fallen over 6% in the past year while it has risen over 7% in the past three months.

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