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AZZ Misses Q2 Earnings Estimates on Hurricane Harvey Impact

Zacks Equity Research

Electrical equipment manufacturer, AZZ Incorporated AZZ posted earnings per share of 32 cents in second-quarter fiscal 2018 (ended Aug 31, 2017), missing the Zacks Consensus Estimate of 41 cents by 22%.

Quarterly earnings were also down 41.8% from 55 cents per share reported in the year-ago quarter.

Total Revenue

AZZ reported second-quarter fiscal 2018 revenues of $190.4 million, beating the Zacks Consensus Estimate of $190 million marginally by 0.2%. However, quarterly revenues dropped 2.4% from $195 million reported last year.

Per the management, second-quarter fiscal 2018 financial performance was impacted significantlydue to the closure of the VC Summer Nuclear Project, and delay of large projects that moved into first-half fiscal 2019. Finally, Hurricane Harvey caused the shutting down of three galvanizing facilities and industrial lighting business during the quarter that hurt the company’s operating numbers.

Revenues of the Energy segment declined 6.4%, from the last year quarter.

Backlogs & Booking

AZZ 's backlog at the end of the quarter was $331.2 million, down 6.1% from $352.8 million a year ago. Approximately 42% of the backlog is related to customers outside the United States, compared with 27% in second-quarter fiscal 2017.

Fiscal second-quarter order booking of $189.9 million was down 2% from $193.7 million booked in the comparable prior-year period.

Quarterly Highlights

Total operating income for the quarter under review improved 1.3% to $15.1 million compared with $14.9 million in the same period last year.

Selling, general and administrative expenses came in at $26.4 million, down 2.2% from $27 million in the prior-year quarter.

Interest expenses for the fiscal second quarter decreased to $3.4 million from $3.6 million reported in the prior-year period.

Looking Ahead

The company lowered EPS guidance range for fiscal 2018 to $1.80-$2.30 and fiscal 2018 revenues to $825-$885 million from previously announced EPS guidance range of $2.60-$3.10 and sales range of $880-$950 million.

Due to challenges related to current markets conditions, management anticipates weak refinery turnaround activity for the rest of the fiscal year. The impact of hurricanes resulted in lowering expectations for the company’s Industrial platform. The Specialty Welding business was restructured during the quarter.

Price Movement

In the last six months, AZZ has lost 17.5% against the industry’s gain of 9.1%.

The company’s lower-than-expected performance in the last trailing four quarters is taking a toll on its share prices.

Zacks Rank

AZZ currently carries a Zacks Rank #5 (Strong Sell). A better-ranked stock from the same space is II-VI Incorporated IIVI that sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

II-VI delivered an average surprise of 50.4% in the trailing four quarters. Its 2017 estimates have risen by 25.4% to $1.92 per share in the last 60 days.

Upcoming Peer Releases

Altra Industrial Motion Corp. AIMC is expected to release third-quarter 2017 earnings on Oct 20. The Zacks Consensus Estimate for the quarter is pegged at 46 cents.

EnerSys ENS is expected to release second-quarter fiscal 2018 earnings on Nov 8. The Zacks Consensus Estimate for the quarter is pegged at $1.05.

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