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Growth & Income

Estimates have been rising for AZZ Incorporated (AZZ - Snapshot Report) after the company delivered strong fourth quarter results for its fiscal 2012.

It is a Zacks #1 Rank (Strong Buy) stock.

Based on current consensus estimates, analysts project double-digit earnings growth over the next few years. On top of this, the company pays a dividend that yields a solid 1.9%.

Company Description

AZZ is a specialty electrical equipment manufacturer. It serves the power generation, transmission and distribution and industrial markets and also provides hot dip galvanizing services to the North American steel fabrication market.

Revenues for fiscal 2012 were divided as follows:

Electrical & Industrial Products: 40%
Galvanizing Services: 60%

The company was founded in 1956 and is headquartered in Fort Worth, Texas. It has a market cap of $662 million.

Fourth Quarter Results

AZZ delivered strong results for the fourth quarter of its fiscal 2012 in early April. Earnings per share came in at 82 cents, beating the Zacks Consensus Estimate by a penny. It was a 12% increase over the same quarter last year.

Revenue rose 23% to $123.6 million, ahead of the Zacks Consensus Estimate of $121.0 million. Revenues for the Electrical & Industrial Products segment jumped 21% while the Galvanizing Service segment rose 24%.

Meanwhile, operating income increased 21% as the operating margin declined 30 basis points to 15.8%.

Backlog at the end of the fourth quarter rose 28% to $138.6 million.

Outlook

Following solid Q4 results, management reiterated its guidance for fiscal 2013. The company expects to earn between $3.25 and $3.55 per share.

And analysts have been raising their estimates for both 2013 and 2014, sending the stock to a Zacks #1 Rank (Strong Buy) stock.

The Zacks Consensus Estimate for 2012 is currently $3.72, above guidance, and representing 19% growth over 2012 EPS. The 2014 consensus estimate is now $4.50, corresponding with 21% growth.

Dividend

In addition to this growth, the company pays a dividend that yields a solid 1.9%. The company reinstituted its regular quarterly dividend in early 2010 at 25 cents per share and has held it steady since then.

Valuation

The valuation picture looks reasonable for AZZ. Shares trade at just 13x 12-month forward earnings, a discount to its 10-year median of 14x.

Its PEG ratio is just 0.8 based on a consensus long-term EPS growth rate of 15.4%.

The Bottom Line

With rising estimates, strong growth projections, a solid 1.9% yield and reasonable valuation, AZZ offers investors attractive total return potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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