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AZZ Incorporated

AZZ

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AZZ Incorporated (AZZ - Snapshot Report) delivered strong first-quarter fiscal 2013 results on the back of a better-than-expected performance at its Galvanizing Service segment. With a sizable order backlog and an expected long-term earnings growth rate of 15.9%, this Zacks #1 Rank (Strong Buy) electrical equipment manufacturer offers an attractive investment opportunity for growth-seeking investors.

Strong Start to Fiscal 2013

On June 28, the company reported first quarter fiscal 2013 operating earnings per share of 48 cents (stock split adjusted), ahead of the Zacks Consensus Estimate by 17.1% and better than last year’s earnings of 38 cents.

Total revenue shot up 11.4% year over year to $127.1 million, while operating margin remained flat at 15%. Cost of sales, as a percentage of revenue, contracted 276 basis points year over year to aid margin.

The company’s backlog increased 18.6% from last year to $136.1 million. It received new orders worth $124.6 million in the quarter.

Upbeat Guidance

AZZ Incorporated expects fiscal 2013 earnings per share (after stock split) between $2.05 and $2.15, reflecting a year-over-year increase of 32% to 39%. Revenue is expected between $550 million and $575 million, reflecting an advancement of 17% to 23% over the prior year.

Earnings Estimate Revisions

The Zacks Consensus Estimates for fiscal 2013 and 2014 increased 1.5% and 3.0% to $2.06 and $2.41, respectively, in the last 30 days. The consensus estimate for fiscal 2013 is near the lower end of the company’s guidance range.

The past 30 days have seen one of three estimates rise for fiscal 2013, and one of our estimates advance for fiscal 2014.

Attractive Valuation

Shares of AZZ Incorporated are roughly trading 15 times the fiscal 2013 estimate with the PEG ratio at 0.92 times. The price-to-free cash flow is at 15.1, an 8.8% discount to the peer group average of 16.6%. The company has a trailing 12-month ROE of 14.9%, substantially higher than the peer group average of 8.8%.

Ever since the latest earnings release on June 28, the stock price has grown 21.6%.

Headquartered in Fort Worth, Texas, AZZ Incorprated was founded in 1956. The company is a manufacturer and seller of electrical equipment and components required for power generation, transmission and distribution. With a market capitalization of $0.78 billion, the company primarily caters to industrial customers in the United States and Canada. As of February 29, 2012, the company operated 34 hot dip-galvanizing facilities in the United States. The company has 2,154 full time employees and competes with Eaton Corporation (ETN) in the electrical equipment market niche.

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