On Friday, Evercore ISI initiated coverage on AZZ Inc . (NYSE:) shares, a galvanized steel and pre-coat metals company, with an Outperform rating and a price target of $90.00.
The firm highlighted the company’s transformation, including a recent equity raise and redemption of convertible securities, which has resulted in a streamlined capital structure.
This financial restructuring follows the 2022 acquisition of a pre-coating business, marking a significant transaction in AZZ’s ongoing efforts to reduce debt to below three times its earnings before interest, taxes, depreciation, and amortization (EBITDA).
The analyst noted that AZZ Inc. now enjoys leading market shares in its two core coating businesses. The improved capital structure and business stability have been reflected in the company’s stock multiple. AZZ is now positioned to capitalize on secular growth opportunities and potentially resume bolt-on acquisitions, which are expected to contribute to the company’s future growth.
Despite potential concerns over the economic cycle, Evercore ISI suggested that the secular opportunities in infrastructure and reshoring could mitigate some of the broader market sensitivities that might affect AZZ. The firm’s price target of $90 is based on approximately 9.5 times its estimated FY25 EBITDA, with the fiscal year ending in February.
The coverage initiation comes at a time when AZZ Inc. has successfully completed a series of strategic moves aimed at improving its financial health and market position. The company’s focus on de-leveraging and the recent capital structure changes have been well-received, as indicated by the positive outlook from Evercore ISI.
Investors and market observers will be watching closely to see if AZZ can continue its positive trajectory through execution on growth opportunities and strategic acquisitions, as suggested by the firm’s analysis.
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