AZZ: 3 Key Takeaways for Long-Term Investors

On its second-quarter fiscal year 2027 earnings call, held on Oct. 14, 2026, AZZ (NYSE:AZZ) reported record quarterly sales of $486.9 million and raised its full-year financial outlook. Multiyear infrastructure spending and utility power upgrades are generating reliable volume across both metal coatings and coil coating operations, helping to shield the business from cyclical softness in residential construction.

Three key takeaways stand out for long-term investors.

1. Utility Grid Modernization Fuels Sustained Order Momentum

Electrical transmission projects and industrial manufacturing build-outs are driving sales across core metal-coating facilities. AZZ customers said their backlogs for utility structures grew 44% in the second quarter, indicating expanding multiyear demand for power grid infrastructure.

This momentum along with sustained order activity throughout the grid infrastructure value chain, supports our positive long term outlook for many of our end markets.
-- David Nark, Chief Marketing Communications and Investor Relations Officer

2. Dedicated Anchor Customers De-risk Capacity Expansion

The company is expanding its geographic coverage by constructing targeted galvanizing plants, including a new hot-dip facility near Tulsa, Oklahoma. Partnering directly with major industrial customers who guarantee baseline order volume upfront secures initial plant utilization and shortens the path to profitability.

Having an anchor customer allows us to ramp up with confidence in that we are going to have the demand available instead of having to go find it and chase it.
-- Thomas E. Ferguson, President and Chief Executive Officer

3. Strong Cash Flow Supports Balance Sheet Deleveraging

Operating cash flow reached $102.8 million for the quarter, enabling management to integrate regional additions such as Seattle Galvanizing Co. while continuing to pay down corporate debt. Net leverage dropped to 1.3 times adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, preserving financial flexibility.

During the quarter, we reduced debt by $15 million and ended the quarter with a net leverage of 1.3x the trailing 12 months adjusted EBITDA.
-- Jason Crawford, Chief Financial Officer

Looking Ahead

Expanding project volumes across power transmission and manufacturing facilities continue to generate operating leverage across operating segments.

Overall, the quarter reflected strong execution margin expansion, cash generation and disciplined capital deployment.
-- Jason Crawford, Chief Financial Officer

A nationwide network of 43 coating facilities, proprietary digital platforms, and long-term customer contracts protect market share against rising material input costs. Management is watching substrate steel availability while prioritizing debt reduction and selective regional acquisitions to compound long-term returns.

With a differentiated market position, strong competitive moat, ample cash flow generation, attractive organic and acquisition opportunities, and favorable secular demand trends, we remain confident in our ability to deliver sustainable earnings growth and increasing shareholder returns over the long term.
-- Thomas E. Ferguson, President and Chief Executive Officer

This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Azz. The Motley Fool has a disclosure policy.