AZZ Incorporated Signals Confidence After Record Quarter

AZZ Incorporated ((AZZ)) has held its Q3 earnings call. Read on for the main highlights of the call.

AZZ Incorporated’s latest earnings call struck an upbeat tone, underscored by record quarterly revenue, record trailing 12‑month adjusted EBITDA, and higher earnings per share. Management emphasized strong execution in its core Metal Coatings operations and continued momentum in consumer and food & beverage containers, while also acknowledging margin pressure, softer construction markets and temporary headwinds from its AVAIL joint venture. Overall, the call communicated confidence that company-led initiatives and a strengthened balance sheet are outweighing current sector and macro challenges.

Record Revenue and Profitability Milestones

AZZ reported the highest quarterly revenue in its history, with third-quarter sales of about $426 million, up 5.5% year over year from $403.7 million. This growth helped push trailing 12‑month adjusted EBITDA to a record $358 million, signaling sustained profitability rather than a one‑off spike. Despite modest margin compression, the company continues to generate solid cash and earnings from its operations, reinforcing the view that the business is on a structurally stronger footing than in prior cycles.

EPS and Net Income Move Higher

Earnings quality improved alongside the top line. Adjusted diluted EPS rose 9.4% to $1.52 in the quarter, up from $1.39 a year ago, reflecting operational leverage and cost discipline. Reported net income increased to $41.1 million versus $33.6 million in the prior-year period. While some headwinds from joint-venture equity earnings weighed on reported figures, the core business performance was clearly stronger, supporting management’s confident tone on the company’s earnings power.

Metal Coatings Segment Powers Growth

The Metal Coatings segment was the standout performer. Segment sales climbed 15.7% year over year, driven by robust demand in infrastructure, solar, transmission and distribution, and data center projects. EBITDA margins in this segment reached 30.3%, illustrating strong returns despite some mix pressure from large projects that tend to be more price-competitive. Even with this margin mix effect, Metal Coatings remains a key profit engine as the company continues to benefit from structural trends in grid hardening, renewable energy and digital infrastructure.

Consumer and Food & Beverage Containers Hit New Highs

AZZ’s consumer and food & beverage container business delivered another quarter of strength, with the Consumer segment up roughly 11% year over year and food & beverage container demand reaching new record highs. The ongoing shift from plastics to aluminum packaging is driving higher volumes, a trend AZZ is capitalizing on through its Washington, Missouri facility. That plant’s ramp-up is supporting growing aluminum container demand and should help sustain volume gains as brand owners and retailers continue to favor more sustainable packaging formats.

Stronger Balance Sheet and Active Capital Allocation

The company used its improving cash generation to bolster financial flexibility and return capital. AZZ generated $79.7 million in operating cash flow during the quarter, enabling $20 million of share repurchases at an average price of $99.28 and a $35 million paydown of debt. Interest expense declined by about $7 million year over year to $12.2 million, and net leverage stands at 1.6x, within the company’s 1.5x–2.5x target range. With $337.1 million in available borrowing capacity, management signaled it has ample room to continue a balanced strategy across debt reduction, buybacks, and reinvestment.

Portfolio Simplification Through AVAIL Actions

Post-quarter, AZZ’s AVAIL joint venture completed the sale of a majority interest in WSI, a move management framed as part of a broader effort to simplify the portfolio and unlock value. The company expects additional divestitures to follow, further sharpening strategic focus. While the AVAIL-related restructuring has created near-term noise in equity earnings, management framed these steps as setting the stage for a cleaner, more focused earnings stream over time.

Precoat Metals Slows on Construction Weakness

Not all segments are firing at full speed. Precoat Metals sales declined 1.8% year over year, reflecting softness in construction, HVAC and transportation end markets, even though there was some sequential improvement. An influx of imported prepainted metal has added pricing pressure, complicating recovery in this business. Management acknowledged that these end markets remain subdued and that the segment faces a tougher backdrop than the company’s higher-growth areas.

Margins Pinched by Mix and Competitive Dynamics

Despite record sales, margins came under moderate pressure. Adjusted EBITDA of $91.2 million represented 21.4% of sales, down from 22.5% a year ago, a roughly 110 basis point decline. Gross margin eased to 23.9% from 24.2%. The shift toward more large-scale infrastructure and data center projects, which tend to be more price-competitive, contributed to this margin squeeze even as volumes rose. Management also flagged broader commodity and competitive uncertainties, such as aluminum at U.S. all-time highs and evolving import and tariff dynamics, as factors that could create additional volatility in pricing and demand.

Equity Earnings and Construction Market Headwinds

Equity earnings from joint ventures dragged on results, with AZZ recording a net loss of $1.4 million in equity earnings for the quarter and a year-over-year decline of $8.6 million, largely tied to AVAIL-related overhead and divestiture adjustments. Management expects equity earnings to be roughly flat in the fourth quarter as these headwinds work through. Meanwhile, nonresidential construction remains subdued, and residential activity is soft in parts of the market, constraining demand for some coated products and delaying a more robust recovery in Precoat and related lines.

Guidance Tightened as Management Signals Confidence

For fiscal 2026, AZZ narrowed its guidance ranges, signaling confidence in the trajectory of the business following a record third quarter. The company now expects total sales of $1.625–$1.7 billion, adjusted EBITDA of $360–$380 million, and adjusted diluted EPS of $5.90–$6.20. These targets build on Q3’s strong performance—sales of $425.7 million, adjusted EBITDA of $91.2 million, adjusted net income of $46 million, and adjusted EPS of $1.52—along with a record trailing 12‑month adjusted EBITDA of $358 million. Management also highlighted expectations for easier comparisons in the fourth quarter relative to last year’s weather-impacted period and indicated that fiscal 2027 guidance will be introduced in the near term, reinforcing a multi‑year growth narrative.

In sum, AZZ’s earnings call portrayed a company benefiting from strong segment-level execution and secular demand tailwinds, particularly in Metal Coatings and aluminum packaging, while proactively tackling weaker construction markets and portfolio noise from AVAIL. Record sales, improved EPS and a healthier balance sheet backed management’s decision to tighten guidance rather than pull back. For investors, the story remains one of solid growth with manageable, well-identified risks, as AZZ seeks to translate its operational momentum into sustained shareholder returns.