AZZ (AZZ): Q1 2027 results, my verdict

2026-07-08 · By Lubin Danilo, founder of Lubin Investment

AZZ: see the full analysis on Lubin Investment

AZZ reported revenue up 6.3% and adjusted earnings per share of $1.85, up 3.9%, while raising its annual guidance. Good results, but my model shows the stock already trades above its fair buy price, with two real weak spots worth watching.

Key takeaways

• First-quarter fiscal 2027 sales up 6.3% to $448.5 million.
• Adjusted EPS of $1.85, up 3.9% year over year, above expectations.
• GAAP net income fell 69.6%, but that's a base effect from a one-off gain last year, not an operating decline.
• AZZ raised its full-year guidance.
• My model shows the stock already trades above its fair buy price.

What was just reported

AZZ, a specialist in galvanizing and metal protection for industry and electrical infrastructure, reported first-quarter fiscal 2027 results on July 8. Revenue climbed 6.3% to $448.5 million. Adjusted EPS came in at $1.85, up 3.9% year over year and well above the analyst consensus of roughly $1.71.

One number stands out at first glance: GAAP net income dropped 69.6%. But that decline doesn't tell a story of a weakening business: last year, AZZ booked a one-off gain tied to its AVAIL joint venture stake, which artificially inflated the comparison. Once that base effect is stripped out, the operating business is genuinely progressing. Management raised guidance for the full fiscal year, a sign of confidence for the rest of the year.

What my quality grid says

AZZ scores 6 out of my 10 criteria. On the positive side: the company is profitable (19.2% net margin), sales grow at a healthy pace (14.1% a year on average over five years), and earnings per share jumped 66% a year over the period.

Two real weak spots stand out. First, shares outstanding are increasing 4.21% a year: unlike a company buying back stock to concentrate value among fewer holders, AZZ is slightly diluting shareholders. Second, converting profit into real cash is weak: only half of accounting profit turns into available cash (0.50), a number worth watching for an industrial company that needs to fund its investments.

The price: already ahead of the good news

AZZ trades at 27.5 times its free cash flow, a rich multiple for its growth profile. My valuation model puts the fair buy price around $110, versus a current price of $143.6. In other words, even after solid results, the market has already largely priced in the news.

My verdict

Solid results and raised guidance are undeniably good operating news. But quality and price are two separate questions: the stock already trades rich relative to the cash it generates, with gradual dilution and room for improvement in converting profit into cash. A good earnings print doesn't automatically make a good stock market deal.

FAQ

Did AZZ beat expectations this quarter?

Yes, its adjusted EPS of $1.85 beat the analyst consensus of roughly $1.71, and sales grew 6.3%.

Why did AZZ's GAAP net income drop so much?

Last year, AZZ booked a one-off gain tied to its AVAIL joint venture. Without that base effect, the operating business is progressing normally.

Is AZZ undervalued after these results?

Not according to my model: the stock trades at 27.5 times free cash flow, above its estimated fair buy price of around $110, versus a current price of $143.6.

What are AZZ's weak spots in your grid?

Shares outstanding are increasing (dilution) and only half of accounting profit turns into real cash, two signals worth watching.

AZZ: see the full analysis on Lubin Investment

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).