Through The Fly's Eyes: Azz Inc.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com

AZZ Inc.: Infrastructure Play In Steel And Electronics

There is an outfit in Fort Worth that is best known for its operations in the heavy industry electronic products arena. It has an interest sideline, though. Being mindful of the benefits of diversification, the company also operates a nationwide chain of plants that galvanize big industry steel.

AZZ Incorporated (AZZ) makes electrical products that distribute power to and from generators, transformers, switching devices and other electrical configurations. It also offers lighting products for the petroleum, food processing, and power generation industries. Its Galvanizing Services segment provides hot dip galvanizing to the steel fabrication industry. Competitors include General Electric (GE) and Eaton Corporation (ETN).

The company pleased investors last week, when it reported fiscal Q2 EPS of 66 cents and revenues of $81.6 million. Analysts had been expecting 48 cents and $78.5 million. Management also guided FY08 EPS to $1.95-$2.05 ($1.82 consensus) and FY08 revenues to $315-$325 million ($316.31M consensus). The CEO noted that the firm is operating with a record backlog. The stock popped on the news and has since moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with one "buy" and two "holds." The AZZ P/E ratio (17.68), Price to Sales ratio (1.42), Price to Book ratio (3.30), Sales Growth rate (29.79%), EPS Growth rate (46.67%), Return on Assets (13.51%), Return on Investment (17.97%) and Return on Equity (21.40%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 72% of the outstanding shares. Over the past 52 weeks, the stock has traded between $17.30 and $41.58. A stop-loss of $31.95 looks good here.