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AZZ Inc. (AZZ) Buys Assets to Focus on Metal Coatings Segment

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·3 min read
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AZZ Inc. AZZ has acquired all the assets of Acme Galvanizing, Inc., a provider of state-of-the-art zinc coating processes. The company expects the transaction to be accretive to its earnings within the first year from the date of its closure.

Deal Benefits

With the completion of the transaction, AZZ will own a successful metal coatings operation including four advanced fully automated zinc plating lines and a totally enclosed galvanizing kettle. Also, it will get an 80,000 square foot facility in Milwaukee, which the company will rename as AZZ Galvanizing and Plating  —Milwaukee. The inclusion of this plant in AZZ’s existing network will increase its total hot-dip galvanizing network to 40 sites in North America and in turn, enhance its diverse customer base in the Midwest.

Moreover, this deal is in sync with the company’s efforts to focus on strengthening its core Metal Coatings business. Notably, this segment accounted for 57.5% of AZZ’s sales in the first six months of fiscal 2021 (ended Aug 31, 2020). Also, it has a long-term strategy to continuously expand its Metal Coatings segment through organic and inorganic initiatives, thereby meeting the operating margins target of 21-23%.

Other Strategic Moves

Along with acquisitions, the company is resorting to divestitures to strengthen its business portfolio. In October 2020, it sold its AZZ SMS LLC operating business unit to Mid-State Machine and Fabricating Corporation in Florida while in July, it successfully divested its Galvabar business.

These divestments are aimed at freeing up the company’s blocked capital, which can now be invested in projects that will generate higher returns from Metal Coatings businesses. Such planned expenditures and divestitures will result in long-term margin expansion.

Zacks Rank & Price Performance

AZZ currently carries a Zacks Rank #3 (Hold). In the past six months, shares of the company have gained 37.3%, outperforming the industry’s rise of 30%.

Stocks to Consider

A few better-ranked stocks from the same industry are IIVI Incorporated IIVI, Rexnord Corporation RXN and SPX FLOW, Inc. FLOW. While IIVI Incorporated flaunts a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term (three to five years) earnings growth rate of IIVI Incorporated, Rexnord and SPX FLOW is pegged at 18.17%, 8.30% and 8.90%, respectively.

IIVI Incorporated, Rexnord and SPX FLOW delivered an earnings surprise of 79.34%, 20.62% and 146.55% each, on average, in the last four quarters.

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AZZ Inc. (AZZ) : Free Stock Analysis Report
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