AZZ Q3 Deep Dive: Tariffs, Infrastructure Demand, and Precoat Headwinds Shape Outlook

Metal coating and infrastructure solutions provider AZZ (NYSE:AZZ) missed Wall Street’s revenue expectations in Q3 CY2025 as sales rose 2% year on year to $417.3 million. On the other hand, the company’s full-year revenue guidance of $1.68 billion at the midpoint came in 0.7% above analysts’ estimates. Its non-GAAP profit of $1.55 per share was 1.5% below analysts’ consensus estimates.

Is now the time to buy AZZ? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

AZZ’s third quarter saw a negative market response as the company’s revenue came in below Wall Street consensus, despite modest year-over-year growth. Management cited strong infrastructure and utility project demand as a positive for the Metal Coatings segment, but highlighted that the Precoat Metals business faced persistent headwinds from tariffs and weak construction markets. CEO Tom Ferguson noted that “operational improvements in Metal Coatings and ongoing market share gains in Precoat” only partially offset the impact of softer end-market demand, particularly in building construction and appliances.

Looking ahead, AZZ’s guidance reflects optimism about sustained infrastructure investment, solid demand for galvanized steel, and ongoing market share gains in aluminum packaging. Management pointed to the multi-year tailwinds from federal infrastructure spending and continued momentum at its new Washington, Missouri facility. Ferguson explained, “We are positioned to benefit from the transition to aluminum in packaging and infrastructure-related projects, though we maintain a cautious outlook for non-infrastructure markets affected by tariffs and higher interest rates.”

Key Insights from Management’s Remarks

Management attributed the quarter’s mixed performance to contrasting trends in its Metal Coatings and Precoat Metals segments, with infrastructure-related demand offset by tariff-driven headwinds and cautious construction markets.

• Metal Coatings outperformance: The Metal Coatings segment benefited from strong demand in infrastructure and utility projects, with double-digit sales growth attributed to robust activity in solar and transmission distribution. Higher volumes were partly offset by a less favorable product mix, as increased exposure to lower-margin end markets weighed on margins.
• Precoat Metals market share gains: Despite a decline in core construction, HVAC, and appliance end markets, the Precoat Metals business captured market share from competitors due to tariffs restricting imported pre-painted metal. Management believes these share gains are sustainable if tariffs persist, though margins have been slightly pressured by the shift to smaller, rapid-turn orders.
• Washington facility ramp-up: The new aluminum coil coating facility in Washington, Missouri, is ramping production and improving operating leverage. The plant is expected to reach higher capacity utilization in the coming quarters, supporting growth in the aluminum container market, which is seeing increased demand due to a shift from plastic to aluminum.
• Tariff-related mixed impacts: Tariff measures created both tailwinds and headwinds, with reduced imports benefiting domestic market share but also leading to project delays and hesitancy in non-infrastructure sectors. Management described the overall effect on Precoat as mixed, with some offset from inventory adjustments by customers.
• Capital allocation discipline: AZZ continued to focus on organic growth investments, select bolt-on acquisitions (such as the recently acquired Canton galvanizing facility), and shareholder returns through dividends and targeted share buybacks. The company maintained leverage within its target range and noted progress in technology upgrades and operational efficiency initiatives.

Drivers of Future Performance

AZZ expects infrastructure spending, continued market share gains, and operational efficiency to underpin growth, while warning that tariff uncertainty and weak non-infrastructure markets could be headwinds.

• Infrastructure tailwinds remain: Management anticipates multi-year benefits from federal infrastructure programs, especially for projects in energy transition, solar, and data center construction, which drive demand for galvanized steel and coatings. These megatrends are expected to partially offset softness in housing and nonresidential construction.
• Ramp-up of new production capacity: The Washington, Missouri facility is projected to boost volumes and margins as it moves toward higher utilization. Management expects its impact to be most pronounced in the aluminum packaging segment, which benefits from the ongoing shift away from plastics.
• Risks from tariffs and construction: Ongoing tariffs on imported metals provide a near-term advantage for domestic producers but have also resulted in project delays and market hesitancy in non-infrastructure sectors. Management cautioned that higher interest rates and uncertainty over future tariff policy could limit upside for Precoat Metals in the near term.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will closely watch (1) the capacity ramp and margin contribution from the Washington, Missouri facility, (2) sustained market share gains in Precoat Metals as tariffs persist, and (3) the impact of ongoing federal infrastructure spending on Metal Coatings demand. Progress on bolt-on acquisitions and operational efficiency upgrades will also be important indicators of AZZ’s execution against its strategic plan.

AZZ currently trades at $101.47, down from $105.94 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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