Thursday, October 10, 2024
Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Second quarter financial results. For the fiscal year (FY) 2025, AZZ reported second quarter adjusted net income of $41.3 million or $1.37 per share compared to $37.2 million or $1.27 per share during the prior year period and our estimate of $40.8 million or $1.35 per share. Adjusted EBITDA increased 4.4% to $91.9 million, roughly in line with our estimate, representing 22.5% of sales versus 22.1% of sales during the second quarter of FY 2024. While sales of $409.0 million were modestly below our $410.5 million estimate, AZZ generated a 25.3% gross margin as a percentage of sales compared to 24.4% during the prior year period and our estimate of 24.4%. AZZ maintained its FY 2025 sales guidance range of $1.525 billion to $1.625 billion, lifted the lower end of adjusted EBITDA to a range of $320 million (from $310 million) to $360 million, and increased adjusted diluted EPS expectations to a range of $4.70 to $5.10 from $4.50 to $5.00.
Debt reduction. During the first half of FY25, AZZ generated operating cash flow of $119.4 million and reduced debt by $45 million. Management expects to reduce debt by at least $100 million during the fiscal year compared to prior expectations of $60 million to $90 million. At quarter end, the company’s net leverage was 2.7x trailing twelve months EBITDA and cash and cash equivalents amounted to $2.2 million.
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