Fiscal Year 2027 Second Quarter
Filed Oct 13, 2026Record quarterly sales and earnings in both segments drove strong adjusted EPS growth, cash flow and shareholder returns; fiscal year 2027 guidance was raised.
Second-quarter sales increased 16.7%, operating income increased 22.4%, adjusted diluted EPS increased 29.0%, operating cash flow increased 76.1%, and the company raised fiscal year 2027 sales, Adjusted EBITDA and adjusted diluted EPS guidance.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Sales, three months ended August 31GAAP | $486.9M | – | up 16.7% |
| Cost of sales, three months ended August 31GAAP | $364.8M | – | – |
| Gross margin, three months ended August 31GAAP | $122.1M | – | – |
| Selling, general and administrative, three months ended August 31GAAP | $38.34M | – | – |
| Operating income, three months ended August 31GAAP | $83.78M | – | up 22.4% |
| Interest expense, net, three months ended August 31GAAP | −$10.81M | – | – |
| Equity in earnings of unconsolidated subsidiary, three months ended August 31GAAP | $6.79M | – | – |
| Other income (expense), net, three months ended August 31GAAP | $27K | – | – |
| Income before income taxes, three months ended August 31GAAP | $79.79M | – | – |
| Income tax expense, three months ended August 31GAAP | $21.34M | – | – |
| Net income, three months ended August 31GAAP | $58.45M | – | down 34.6% |
| Basic earnings per common share, three months ended August 31GAAP | $1.95 | – | – |
| Diluted earnings per common share, three months ended August 31GAAP | $1.94 | – | down 34.2% |
| Adjusted net income, three months ended August 31non-GAAP | $60.13M | – | up 28.1% |
| Adjusted diluted earnings per share, three months ended August 31non-GAAP | $2.00 | – | up 29.0% |
| Adjusted EBITDA, three months ended August 31non-GAAP | $110.9M | – | – |
| Adjusted EBITDA margin, three months ended August 31non-GAAP | 22.8% of sales | – | – |
| Sales, six months ended August 31GAAP | $935.4M | – | – |
| Cost of sales, six months ended August 31GAAP | $701.1M | – | – |
| Gross margin, six months ended August 31GAAP | $234.3M | – | – |
| Selling, general and administrative, six months ended August 31GAAP | $73.48M | – | – |
| Operating income, six months ended August 31GAAP | $160.8M | – | – |
| Net income, six months ended August 31GAAP | $110.5M | – | – |
| Diluted earnings per common share, six months ended August 31GAAP | $3.66 | – | – |
| Adjusted net income, six months ended August 31non-GAAP | $115.9M | – | – |
| Adjusted diluted earnings per share, six months ended August 31non-GAAP | $3.84 | – | – |
| Adjusted EBITDA, six months ended August 31non-GAAP | $210.3M | – | – |
| Net cash provided by operating activities, six months ended August 31GAAP | $140.0M | – | – |
| Net cash used in investing activities, six months ended August 31GAAP | −$78.89M | – | – |
| Net cash used in financing activities, six months ended August 31GAAP | −$59.98M | – | – |
| Cash and cash equivalents, August 31GAAP | $1.95M | – | – |
| Long-term debt, netGAAP | $468.5M | – | – |
| Total assetsGAAP | $2.34B | – | – |
| Shareholders' equityGAAP | $1.42B | – | – |
| Net leverage rationon-GAAP | 1.3x | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Metal CoatingsHigher volume of steel processed driven by increases in construction, industrial, infrastructure and transportation end markets, plus higher average selling prices in response to inflationary pressures. | $233.5M | – | up 22.9% |
| Precoat MetalsHigher coil-coating volume and average selling prices, including vendor price increases passed through to customers, and higher sales from the Washington, Missouri facility; partially offset by lower volume in HVAC and appliances, transportation and other end markets. | $253.4M | – | up 11.5% |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Fiscal year 2027 ending February 28, 2027 outlook
- Revenue$1.825 - $1.875 billion
- Tax rate25%
- NoteAdjusted EBITDA: $380 - $420 million
- NoteAdjusted Diluted EPS: $7.00 - $7.30
- NoteCapital expenditures: approximately $80 to $100 million
- NoteInterest expense: $35 to $45 million
- NoteDebt reduction: $100 to $140 million
- NoteGuidance excludes M&A activity and any federal regulatory changes that may emerge.
- NoteGuidance excludes any additional potential M&A activities beyond the Seattle Galvanizing acquisition completed in Q2 FY2027.
- NoteGuidance excludes the potential for equity in income (or loss) and cash distributions from AZZ's minority interest in its unconsolidated subsidiary.
Capital returns
- Repurchased 136,303 shares of common stock, or $20.0 million at an average purchase price of $146.71, during the quarter.
- Cash dividend of $0.24 per share to common shareholders paid during the quarter.
- Cash dividends declared per common share were $0.24 for the three months ended August 31, 2026, compared with $0.20 for the three months ended August 31, 2025.
- During the first six months of fiscal year 2027, repurchased $20.0 million of common stock and returned cash to common shareholders through cash dividend payments totaling $13.2 million.
What drove it
- Record sales reflected organic sales growth, the continued ramp-up of the Washington, Missouri facility in Precoat Metals and the Seattle Galvanizing acquisition in the Pacific Northwest.
- Metal Coatings benefited from higher processed-steel volume and higher average selling prices.
- Precoat Metals benefited from higher coil-coating volume, vendor price increases passed through to customers and Washington, Missouri facility sales.
- Lower interest expense was included in fiscal year 2027 guidance assumptions.
Concerns
- GAAP net income declined 34.6% and GAAP diluted EPS declined 34.2% because prior-year results included significant equity in earnings from the AVAIL JV following the sale of the Electrical Products Group.
- Precoat Metals growth was partially offset by lower volume in HVAC and appliances, transportation and other end markets.
- Guidance excludes M&A activity, federal regulatory changes, additional acquisitions beyond Seattle Galvanizing and potential equity income or loss and cash distributions from the unconsolidated subsidiary.
- The company identified potential inflationary increases in labor, component and raw-material costs, particularly zinc, natural gas and paint, as well as variable-rate debt and interest-rate exposure.
What to watch
- Sales momentum across Metal Coatings and Precoat Metals relative to revised fiscal year 2027 sales guidance of $1.825 - $1.875 billion.
- Ramp-up and earnings accretion from the Washington, Missouri plant.
- Precoat Metals volumes in HVAC and appliances, transportation and other end markets.
- Execution of expected debt reduction of $100 to $140 million and capital expenditures of approximately $80 to $100 million.
- The contribution of Seattle Galvanizing and any change in the excluded AVAIL JV equity income or loss and cash distributions.
Balance sheet and cash flow
- Cash flow from operations for the quarter was $102.8 million, up 76.1%.
- Operating cash for the first six months of fiscal year 2027 was $140.0 million.
- Capital expenditures for the first six months of fiscal year 2027 were $37.2 million.
- Completed the acquisition of Seattle Galvanizing in the Metal Coatings segment for $57.5 million during the first six months of fiscal year 2027.
- Paid down debt of $15.0 million during the first six months of fiscal year 2027.
- Gross debt was $500,000 (dollars in thousands) at August 31, 2026, compared with $515,000 (dollars in thousands) at February 28, 2026.
- Consolidated indebtedness was $538,850 (dollars in thousands) at August 31, 2026, compared with $515,519 (dollars in thousands) at February 28, 2026.
Analysis
AZZ reported record second-quarter sales of $486.9 million, up 16.7%, with both operating segments contributing. Metal Coatings sales increased 22.9% to $233.5 million, supported by higher processed-steel volume across construction, industrial, infrastructure and transportation end markets and higher average selling prices. Precoat Metals sales increased 11.5% to $253.4 million, driven by coil-coating volume, price pass-throughs and the Washington, Missouri facility ramp-up, although lower volume in HVAC and appliances, transportation and other end markets remained an offset.
Profitability improved on an operating and adjusted basis. GAAP operating income increased 22.4% to $83.8 million. Consolidated Adjusted EBITDA rose to $110.9 million from $88.7 million, while Adjusted EBITDA margin was 22.8% of sales compared with 21.3% of sales in the prior-year quarter. Metal Coatings generated a 30.7% segment Adjusted EBITDA margin and Precoat Metals generated a 21.2% margin, with the latter increasing 100 basis points from the prior-year second quarter primarily due to higher sales.
GAAP net income and diluted EPS declined because the prior-year comparison included a significant AVAIL JV-related gain. Net income was $58.5 million and GAAP diluted EPS was $1.94, compared with $89.3 million and $2.95, respectively, in the prior-year quarter. The non-GAAP view showed the underlying operating improvement more directly: adjusted net income increased 28.1% to $60.1 million and adjusted diluted EPS increased 29.0% to $2.00. The equity-in-earnings line declined to $6.8 million from $59.3 million, and the AVAIL JV adjustment was $(6.7) million versus $(61.6) million in the adjusted reconciliation.
Cash generation and capital allocation were prominent in the quarter. Quarter operating cash flow was $102.8 million, up 76.1%, and first-half operating cash was $140.0 million. AZZ acquired Seattle Galvanizing for $57.5 million, repurchased $20.0 million of stock, paid down $15.0 million of debt and paid $13.2 million of dividends during the first half. Net leverage improved to 1.3x trailing twelve months Adjusted EBITDA from 1.4x at February 28, 2026.
Management raised fiscal year 2027 guidance to sales of $1.825 - $1.875 billion, Adjusted EBITDA of $380 - $420 million and adjusted diluted EPS of $7.00 - $7.30. The revised outlook assumes an annualized effective tax rate of 25%, interest expense of $35 to $45 million, capital expenditures of approximately $80 to $100 million and debt reduction of $100 to $140 million. The guide excludes additional M&A beyond Seattle Galvanizing, federal regulatory changes and potential AVAIL JV equity income or loss and cash distributions.
Management, verbatim
Our record second-quarter sales of $486.9 million , up 16.7%, reflects not only strong execution but also the strength of our long-term strategy and the durability of our business model.
Tom Ferguson, President, and Chief Executive Officer of AZZ
We are increasing our annual financial guidance to reflect our quarterly performance, sustained sales momentum across both segments and increased confidence in our outlook for the remainder of fiscal year 2027.
Tom Ferguson, President, and Chief Executive Officer of AZZ
We continued to strengthen our balance sheet and return value to shareholders, reducing debt by $15 million, repurchasing $20.0 million of common stock, increasing our quarterly cash dividend by 20% to $0.24 per share and completing the strategic acquisition of Seattle Galvanizing.
Tom Ferguson, President, and Chief Executive Officer of AZZ
Not in the filing
stated, not guessed- Free cash flow was not reported.
- GAAP gross margin percentage was not reported.
- Quarterly cash and cash equivalents balance was not separately reported.
- Prior-quarter comparisons for income statement and segment results were not reported.
- A prior earnings release outlook was not provided for comparison with actual results.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.