Company Profile:
AZZ operates in two product segments: Electrical & Industrial Products, and Galvanizing Services. The company’s Electrical & Industrial Products segment manufactures products used by utilities to safely generate and distribute electricity, as well as industrial lighting and tubular products for the oil and gas industry. AZZ’s galvanizing services segment coats steel products in zinc to protect them from corrosion.
The Company operatse fourteen galvanizing plants, which are located in Texas, Louisiana, Alabama, Mississippi, Arkansas, Arizona, Indiana and Ohio. Hot dip galvanizing is a metallurgical process, in which molten zinc is applied to a customer’s material.
The zinc bonding renders a corrosion protection to fabricated steel for extended periods of up to 50 years. The Company typically serves fabricators and/or manufacturers, who provide services to the electrical and telecommunications, bridge and highway, petrochemical and general industrial markets, as well as a number original equipment manufacturers (OEMs).
Sales:
|
2003
|
2004
|
2005
|
2006
|
2007
|
TTM
|
|||||||
|
Sales $Mil
|
183
|
136
|
152
|
187
|
260
|
323
|
||||||
|
Operating Income $Mil
|
18
|
—
|
9
|
14
|
36
|
45
|
||||||
|
|
5
|
—
|
3
|
4
|
13
|
16
|
||||||
|
|
9
|
4
|
5
|
8
|
22
|
27
|
||||||
|
Earnings/Share $
|
0.82
|
0.39
|
0.44
|
0.69
|
1.82
|
2.25
|
||||||
|
EPS (Cont Ops) $
|
0.80
|
0.40
|
0.40
|
0.70
|
1.80
|
2.30
|
||||||
|
Dividends/Share $
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
||||||
|
Total Shares Mil
|
10
|
11
|
11
|
11
|
12
|
12
|
||||||
Quarterly income:
|
Sales
|
02-07
|
05-07
|
08-07
|
11-07
|
|
Current $Mil
|
80.0
|
75.0
|
82.0
|
87.0
|
|
% Change From Year Earlier
|
39.10
|
43.70
|
29.80
|
32.50
|
|
Net Income
|
||||
|
Current $Mil
|
7.0
|
4.0
|
8.0
|
8.0
|
|
% Change From Year Earlier
|
176.00
|
0.50
|
53.90
|
54.30
|
|
Earnings/Share
|
||||
|
Current $
|
0.58
|
0.34
|
0.66
|
0.66
|
|
% Change From Year Earlier
|
163.80
|
-2.90
|
46.70
|
50.00
|
Free Cash Flow (in $Millions):
|
2005
|
2006
|
2007
|
TTM
|
|
6
|
13
|
7
|
19
|
|
7
|
7
|
11
|
12
|
|
0
|
6
|
-4
|
8
|
Profitability:
|
PROFIT MARGINS
|
2004
|
2005
|
2006
|
2007
|
2008
|
2008 Q1
|
2008 Q2
|
2008 Q3
|
2008 Q4
|
2009 Q1
|
TTM
|
|
Gross Margin
|
19.1
|
18.7
|
19.9
|
25.7
|
25.2
|
25.4
|
26.0
|
23.4
|
26.0
|
26.3
|
25.4
|
|
EBIT Margin
|
5.1
|
4.9
|
6.4
|
13.3
|
13.7
|
9.0
|
15.8
|
14.7
|
14.9
|
15.8
|
15.3
|
|
EBT Margin
|
5.1
|
4.9
|
6.4
|
13.3
|
13.7
|
9.0
|
15.8
|
14.7
|
14.9
|
15.8
|
15.3
|
|
Net Margin
|
3.1
|
3.2
|
4.2
|
8.3
|
8.6
|
5.5
|
9.9
|
9.3
|
9.6
|
10.1
|
9.8
|
|
Tax Rate
|
37.9%
|
35.0%
|
34.9%
|
37.3%
|
36.8%
|
39.1%
|
36.9%
|
36.3%
|
36.0%
|
35.8%
|
36.2%
|
|
Payout Ratio
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
Normalized EBIT Margin
|
6.6
|
6.0
|
7.3
|
13.6
|
14.2
|
9.8
|
16.2
|
15.0
|
15.4
|
16.9
|
15.9
|
|
Return on Equity
|
5.9%
|
6.4%
|
9.0%
|
19.2%
|
19.0%
|
21.4%
|
Ownership:
|
Shares Outstanding
|
12,000,000
|
|
Fund Ownership
|
4,560,000
|
|
Total# of Funds
|
86
|
Technical Analysis:
Though the market has been bullish on AZZ in general, it’s overbought and that’s a definite concern. It’s seen a great rally from $24 to $46 in the past 52 weeks and is trading just below it’s 80-day resistance level of $44.82. It’s beta is 0.3 which is positive and indicates that it doesn’t react much to the volatility of the market.
My Decision:
Per my calculations I expect the stock to trade between $46-52. Given it’s already at $44 and change, I believe it’s golden run is stalling. The stocks got a relative high PEG ratio and its current PE is 3 times higher than its industry and sector peers. I am going to put this on the watch-list for my portfolio and HOLD for now. A good time to get into this stock will be when it trades in the $28-32 range.
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