Thursday, January 25, 2024
Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Fiscal third quarter results continued AZZ’s upward trend. AZZ reported strong results in the third quarter as sales continued to expand and operating margins increased. While there was a nonrecurring boost to AZZ’s nonconsolidated division, that should not take away from favorable results at AZZ’s Metal Coating and Precoat Metals divisions. We look for top-line growth to continue at a 2-3% rate and for EBITDA margins to continue to expand towards 25% with a continued shift toward the higher-margin Metal Coating division.
Coating company stocks have risen in recent months. The DJIA has risen 14% in the last three months. AZZ’s increase of 33% over that time period leads its coating peer group, but other stocks such as Chemours (CC) and Sherwin-Williams (SHW) have also risen more than 25%. As a result, the peer group median forward P/E has risen to 17 times from 15 times and the median EV/EBITDA has increased to 13 times from 10 times.
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