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AZZ Inc Buys Preferred Industries, Expands Metal Coatings

Zacks Equity Research

AZZ Inc. AZZ announced that it has acquired all the assets of Preferred Industries, Ltd. (commonly known as Preferred) — a Rowlett and Terrell, TX-based privately-held company. The terms of the agreement were not disclosed.

AZZ Inc will operate Preferred’s 155,000-square foot facility in Terrell and an 89,600-square foot facility in Rowlett. Preferred is a powder and e-coating service company. The acquired assets will be integrated in the company’s existing powder coating and plating operations. Moreover, the assets will enable the company to expand its footprints to eight locations in the Dallas-Fort Worth area.

Strategic Acquisitions

The company is focused on widening its service offerings. As of Feb 28, 2019, the company operated 42 metal coating plants located in various locations in the United States and Canada. Through acquisitions of companies or assets, AZZ Inc intends to expand its geographic footprint and increase customer base.

Recently, the company has acquired the assets of Texas-based NuZinc, LLC — a plating company in the Dallas-Fort Worth area. In April 2019, the company completed the acquisition of all the outstanding shares of K2 Partners, Inc and Tennessee Galvanizing, Inc. K2 Partners provides powder coating and electroplating solutions to customers in the Midwest and Southeast from locations in Texas and Florida. Tennessee Galvanizing provides galvanizing solutions to customers throughout the United States. We expect these acquisitions to boost the company’s performance in the long run.

Improvements in the Metal Coatings Segment

The company is a global provider of metal coating solutions. Strategic acquisitions have expanded the segment’s geographical reach in new markets. Metal Coatings experienced higher demand in the solar and petrochemical markets.

Contributions from the acquisition of Tennessee Galvanizing and K2 Partners also boosted the segment’s performance. Courtesy of acquisitions and improving demand, revenues in the Metal Coatings segment increased 6% in first-quarter fiscal 2020 to $29.4 million. We believe that the recent buyout will boost the segment in the upcoming days.

Price Movement

The company’s shares gained 5.4% in the past six months compared with the industry’s decline of 1.7% .

Zacks Rank & Other Stocks to Consider

AZZ Inc currently sports a Zacks Rank #1 (Strong Buy).

Investors can consider other top-ranked stocks from same sector like Acco Brands Corporation ACCO, AGCO Corporation AGCO and Roper Technologies, Inc ROP. AGCO sports a Zacks Rank #1, while Acco Brands and Roper Technologies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Acco Brands, AGCO and Roper Technologies delivered average positive earnings surprise of 15.57%, 33.84% and 6.92%, respectively, in the last four quarters.

Long-term earnings growth for Acco Brands, AGCO and Roper Technologies is pegged at 7%, 13.68% and 11%, respectively.

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