AZZ: Profiteer of Rising Infrastructure Spending in the USA
AZZ is a leading provider of hot-dip galvanizing and coil coating solutions in North America AZZ provides sustainable, high-quality metal coating solutions that improve the durability and appearance of the buildings and infrastructure we rely on every day. Demand from industry, energy and public infrastructure projects is keeping AZZ in high demand AZZ (NYSE: AZZ) is a global provider of metal coating services, welding solutions, specialized electrical equipment and advanced services to the power generation, transmission, distribution...
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- AZZ is a leading provider of hot-dip galvanizing and coil coating solutions in North America
- AZZ provides sustainable, high-quality metal coating solutions that improve the durability and appearance of the buildings and infrastructure we rely on every day.
- Demand from industry, energy and public infrastructure projects is keeping AZZ in high demand
AZZ (NYSE: AZZ) is a global provider of metal coating services, welding solutions, specialized electrical equipment and advanced services to the power generation, transmission, distribution and industrial markets for the protection of metal and electrical systems used to build and improve the world\'s infrastructure. The focus is particularly on the construction, power generation and transmission and general industrial applications.
Infrastructure spending in the USA serves as a growth driver
AZZ is well positioned to capitalize on the strength of its end markets around infrastructure and commercial construction. This is supported by the increased use of federal stimulus funds, including the Infrastructure Investment and Jobs Act (IIJA), the CHIPS and Science Act and the Inflation Reduction Act (IRA). In addition, a higher likelihood of several interest rate cuts in the coming year is expected to spur recovery in the residential and commercial real estate end markets. In addition, increasing demand in other end markets such as air conditioning and appliances as well as easier year-over-year comparisons in the Precoat Metal business should further benefit the company\'s revenue in 2024.
Hot-dip galvanizing is an underestimated process
Hot-dip galvanizing has been used for more than 250 years to protect steel and iron from damage caused by corrosion. Galvanized steel has significantly lower life cycle costs than other materials such as painted steel or epoxy-coated surfaces and requires no maintenance of the coating throughout its lifetime. AZZ also plays a crucial role in the renewable energy market. Today, utilities are prioritizing modernization efforts to address aging infrastructure and integrate renewable energy sources. AZZ\'s hot-dip galvanizing and surface technology provides corrosion protection for critical infrastructure such as power transmission towers, wind turbines and solar farms.
AZZ successfully closes the 2024 financial year
The company reported its Q4 figures on 22.04.2024. Revenue increased surprisingly strongly by 9%. At $0.93, earnings per share were well above expectations of $0.70. This is in line with the fact that AZZ had raised its EPS forecast for the current financial year from $4.25-4.75 to $4.50-5.00 around two weeks earlier. This forecast was reaffirmed in the context of the figures. Looking at the year as a whole, revenue in the metal coatings segment increased by 3% to $656.2 million. This was driven by a continued focus on value-for-money pricing initiatives and an increase in hot-dip galvanizing volumes, driven by continued strength in the renewable energy, utility and OEM construction markets. The metal pre-coating business also performed well. Revenue here increased by 28% to $881.4 million.
Conclusion: AZZ is benefiting from strong long-term trends in favor of reshoring and infrastructure upgrades as well as a cyclical recovery in demand for metals. In addition, there is a structural improvement in free cash flow with simultaneous debt reduction. The share is not cheap with a current P/E ratio of 24, but the share has always been highly valued.
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