AZZ turns bullish on reiteration of FY17 EPS and revenue

On Friday, the shares of metal finishing solutions provider AZZ incorporated (AZZ) closed at $60.12, which is just a few notches below the 12-month high of $60.92. The company reported its fiscal 2017 first-quarter results last week. The earnings missed the Thomson Reuters estimates, while the revenue was at par with the consensus of analysts. However, the share price hardly went down. In fact, it now looks as if the share price is going to record a new 12-month highs due to the reasons mentioned below.

The fiscal 2017 AZZ first-quarter net sales of $242.67 million were in line with the analysts’ estimates. However, it was higher than the fiscal 2016 first-quarter net sales of $228.89 million.

AZZ incorporated

During the first-quarter, the net sales for the Energy segment increased to $138.10 million, from $137 million in the first-quarter last year. Similarly, the Galvanizing segment recorded net sales of $104.57 million, compared to $91.89 million in the year-ago corresponding period.

For the Q1 2017, the welding solution provider reported net income of $21.06 million or $0.81 per share, up from $19.92 million or $0.77 per share in the Q1 2016. However, the net income missed the Wall Street estimates by 2 cents.

The order backlog at the end of first-quarter increased 11% y-o- y to $354.2 million. Similarly, the book-to- shipment ratio (new orders booked divided by completed shipments) for the quarter increased to 1.03, from 0.94 in the corresponding period last year.

The management also reiterated its full year 2017 revenue guidance in the range of $930 million to $970 million. The specialty engineering service provider also reaffirmed its fiscal 2017 earnings guidance of $3.15 to $3.45 per share.

The Texas-based company also declared quarterly cash dividend of $0.15 per share, payable on August 1, 2016. Even though the company missed analysts’ estimates, the financial health looks impressive. The reiteration of earnings and revenue guidance also indicates that the management is optimistic about the future growth of the company.

Thus, fundamentally, we can expect the share price to prop up in the current quarter. The stock is firmly rooted above the 50-day moving average of 58. Furthermore, the chart indicates a major support for the stock at 57 levels. The RSI is rising with a bullish reading of 54.

Thus, assuming an increase in the share price, trading a one touch call option would be the best plan. The binary trader should opt for a target price of $67 or lower for the call option trade. A three week time period would suffice for the price to achieve the target. Thus, contract termination date should be preferably in the first-week of August.