Can you provide more color on the deverticalization model and if it's a growing trend across your customer base?

AZZ actively discusses this model with customers, especially when their kettles need replacement/repair. They offer to take the furnace/kettle and zinc, providing liquidity and securing long-term service agreements. It's a scalable blueprint, with the first such deal in 5-6 years recently closed. “we just like to think we're a whole lot better at how dip galvanizing than they probably are since it's not their focus.”

What are some of the gating factors for M&A, specifically for the deal expected to close this month?

The specific deal has been in due diligence for about 6 months, longer than the typical 45-75 days, indicating some rustiness in the process. The galvanizing market is hot, making some owners less willing to transact. AZZ is paying better multiples due to confidence in driving synergies. “this one's kind of drag along for about 6 months.”

Given strong Q1 and high EBITDA run rate, what seasonality or factors should be considered for Q2/Q3, knowing Q4 tends to be softer?

The Q1 strength and raised guidance are due to the Washington, MO site hitting run rates sooner and sustained strength in Metal Coatings. No unusual factors are expected for Q2/Q3, and Q4 depends on winter severity. Q2 is off to a good start. “we're almost halfway through the second quarter. And we got off to a really good start. So we're feeling good.”

AZZ

AZZ (AZZ) Q1 FY27 earnings call: guidance and Q&A

Earnings call· May 2026 (Q1 FY27)· Industrials· Jul 9, 2026

Source: earnings call transcript

Executive summary

AZZ Inc. Q1 FY27 — Record Sales and Raised Full-Year Guidance

AZZ Inc. reported a strong first quarter for fiscal 2027, driven by record sales in both segments, particularly Metal Coatings, and the successful ramp-up of the Washington, Missouri facility. The company raised its full-year guidance, reflecting confidence in its strategic execution, robust end markets like data centers and grid modernization, and disciplined capital deployment. Management highlighted a scalable deverticalization model and an active M&A pipeline to capitalize on long-duration secular growth cycles.

Highlights

Delivered record sales of $448.5 million, up 6.3% year-over-year, driven by strong double-digit growth in Metal Coatings.
Adjusted diluted EPS increased 3.9% year-over-year to $1.85, demonstrating continued earnings growth despite prior year JV-related earnings.
Raised full-year fiscal 2027 sales guidance to $1.8 billion-$1.85 billion and adjusted EBITDA to $375 million-$415 million.
Increased quarterly cash dividend by 20% to $0.24 per share, reflecting confidence in earnings and cash flow sustainability.
Net leverage remained low at 1.4x, providing significant financial flexibility for growth and capital returns.

Concerns

Precoat Metal sales growth of 1.5% was partially offset by softer volume in certain construction, HVAC, and appliance end markets.
Transportation sales were down 1.2% due to lower commercial trailer activity.
HVAC and appliances sales were down 2.4% on lower residential new construction.
Infrastructure Solutions adjusted EBITDA dropped from $7.6 million in Q1 FY26 to a loss of $0.8 million in Q1 FY27 due to business divestitures.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year fiscal 2027 sales	$1.8 billion to $1.85 billion high materiality	FY27	High
Full-year fiscal 2027 adjusted EBITDA	$375 million to $415 million high materiality	FY27	High
Full-year fiscal 2027 adjusted diluted EPS	$6.75 to $7.15 high materiality	FY27	High
Full-year fiscal 2027 debt reduction	$130 million to $170 million medium materiality	FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Metal Coatings Strong double-digit sales growth, reflecting continued momentum across construction, industrial, and infrastructure end markets. Underlying margins remain strong and consistent with long-term expectations.	—	12.3%	—	—
Precoat Metals Sales supported by the pass-through of higher paint and input costs and the continued ramp-up at the Washington, Missouri facility, partially offset by softer volume in certain construction, HVAC, and appliance end markets. Margins improved modestly on operational performance and mix from the Washington, Missouri facility.	—	1.5%	—	—
Infrastructure Solutions Adjusted EBITDA dropped from $7.6 million in the prior year first quarter to a loss in the current quarter, reflecting the impact of business divestitures in the Aveo JV that occurred throughout fiscal year 2026.	—	—	—	-$0.8 million (adjusted EBITDA)
Consolidated Record first quarter sales driven by strong performance in Metal Coatings and ramp-up at Washington, MO facility. Gross profit was $112.2 million or 25% of sales, representing a 30 basis point improvement year-over-year. Operating income increased to $77 million or 17.2% of sales, an improvement of 70 basis points versus the prior year. Consolidated adjusted EBITDA was $99.5 million or 22.2% of sales.	$448.5 million	6.3%	—	—
Construction End Market Growth driven by continued strength in large data center and manufacturing-related projects.	—	3.9%	—	—
Industrial End Market Growth supported by increased demand for utility scale power projects.	—	7.8%	—	—
Container End Market Growth primarily resulting from the ramp at the new Washington, Missouri plant.	—	194%	—	—
Infrastructure End Market Essentially flat compared to the same quarter in the prior year, with mixed results by segment.	—	flat	—	—
Transportation End Market Decline on lower commercial trailer activity.	—	-1.2%	—	—
HVAC and Appliances End Market Decline on lower residential new construction.	—	-2.4%	—	—

Deals & partnerships

vertically integrated manufacturer divestiture / partnership long-term service agreement

A vertically integrated manufacturer chose to partner with AZZ to divest its noncore galvanizing operation to reduce complexity and cost. As part of this agreement, AZZ acquired their galvanizing Kettle in zinc, providing them with immediate cash liquidity while securing a long-term service agreement. This is viewed as a scalable blueprint for future partnerships.

unnamed acquisition

AZZ is actively evaluating a robust pipeline of high-quality acquisition targets that align with core capabilities and meet return thresholds. The company expects to announce a deal later this month, which has been in due diligence for about 6 months.

Capital programs

Crowley, Texas kettle expansion commissioned

Benefit:doubled capacity

Successfully commissioned a new large kettle to meet growing regional demand for hot dip galvanizing effectively doubling our capacity at Crowley, Texas. This low-risk, high-return investment supports growing customer demand and strong market fundamentals.

Washington, Missouri Precoat Metals facility ramp-up ramping production

Benefit:approaching an expected contribution margin levels for this year; performance with strategic partner in beer and beverage-related container category has been very encouraging; on track to contribute meaningfully to revenue and profitability as we move through fiscal year 2027; sales range of $50M-$60M for 75% capacity

Washington, Missouri facility continues to ramp production as planned. We remain on track to reach targeted utilization with our strategic partner, while actively seeking the commercialization of the remaining capacity. The facility is approaching an expected contribution margin levels for this year.

Risks & headwinds

Softer volume in certain Precoat Metals end markets Q1 FY27

Partially offset 1.5% Precoat Metal sales growth

Mitigation:Ramp-up of Washington, MO facility and pass-through of higher paint/input costs.

Lower commercial trailer activity Q1 FY27

Transportation sales down 1.2%

Lower residential new construction Q1 FY27

HVAC and appliances sales down 2.4%

Impact of business divestitures in Aveo JV Q1 FY27

Infrastructure Solutions adjusted EBITDA dropped from $7.6 million in Q1 FY26 to a loss of $0.8 million in Q1 FY27

Tariff impact on substrate availability and cost Past 18-24 months, stabilizing

Made substrate less available or of higher cost for Precoat Metals customers

Mitigation:Higher substrate prices may make imports more attractive, easing supply constraints; working closely with customers.

Q&A highlights

How are energy costs/volatility impacting customer decision-making and project timelines, especially with Middle East events?

Metal Coatings markets are robust, with strength in grid improvement and data centers, seeing projects move forward. Precoat Metals tariffs have stabilized, and substrate prices may attract imports, which is good for customers. No unusual headwinds anticipated.

“on the Metal Coatings side, there's just not a lot of clouds on the horizon.”

asked by Josh Westley · answered by Thomas Ferguson

2 min read 6 chapters

Detailed narrative

Strategic Investments & Capacity Expansion

AZZ is investing in capacity, exemplified by the new large kettle in Crowley, Texas, which doubled capacity to meet growing regional demand. This low-risk, high-return investment supports strong market fundamentals, particularly in the Southern U.S. The Washington, Missouri Precoat Metals facility is also ramping production as planned, approaching targeted utilization and expected contribution margin levels for the year, with its performance in the beer and beverage-related container category being very encouraging.

Deverticalization Model

The company successfully partnered with a vertically integrated manufacturer to acquire their galvanizing kettle and zinc, providing immediate cash liquidity and securing a long-term service agreement. This deverticalization model, which reduces complexity and cost for customers while creating long-term revenue streams for AZZ, is viewed as a scalable blueprint for future partnerships, with the company actively pursuing similar opportunities.

Digital Capabilities & Operational Excellence

AZZ leverages proprietary technologies like the digital galvanizing system in Metal Coatings and CoilZone in Precoat Metals to drive consistency, efficiency, and data-driven decision-making. These digital assets strengthen customer relationships, improve execution, and are forming the basis for utilizing AI to enhance customer intimacy, fine-tune pricing decisions, and support operating efficiency improvements and sustainability initiatives.

End Market Dynamics & Infrastructure Investment

The company has enhanced its sales disclosure to reflect six primary categories, with construction, industrial, and container showing growth. Management believes the company is in the early stages of a significant and sustained investment cycle, driven by modernizing the aging electric grid, ongoing infrastructure, energy, and industrial capital deployment, and a multi-decade capital investment cycle across utility, transmission, distribution, and grid technology.

M&A and Greenfield Opportunities

AZZ is actively evaluating a robust pipeline of high-quality acquisition targets that align with core capabilities and return thresholds, with an expectation to announce a deal later this month. The company is also evaluating greenfield galvanizing opportunities, particularly where they can partner with strategic customers in high-growth regions like Texas and the Southeast, to provide better solutions and customer concentration, with typical greenfield CapEx estimated at $35M-$40M and an 18-month build-out.

Capital Allocation Strategy

The company maintains a strong balance sheet with low net leverage of 1.4x and a commitment to returning capital to shareholders, evidenced by a 20% increase in the quarterly cash dividend to $0.24 per share. They also have a strong share repurchase program with $133.2 million available, indicating a willingness to buy back shares if market conditions are favorable, as the stock has traded in a range that would make repurchases attractive.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.