3SOF

Another video analysis from David Randolph, rating AZZ with 7 out of 10:

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<font size="1"><img src="http://www.3stocksonfire.org/images/logo_3s_mini3.gif" border="0" align="absmiddle"> A video Analysis from 3StocksOnFire.org</font>

June 21st, 2007:

AZZ initial analysis:

AZZ profit climbs 54%, lifts FY guidance

By Steve Goldstein
Last update: 5:04 a.m. EST Jan. 4, 2008Print  RSS Disable Live Quotes

LONDON (MarketWatch) -- Electrical products maker AZZ (AZZ:azz inc com
News, chart, profile, more
Last: 30.61+1.76+6.10%

9:30am 01/04/2008

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AZZ 30.61, +1.76, +6.1%) said third-quarter ending Nov. 30 net income rose 54% to $8.1 million, or 66 cents a share, with revenue up 32% to $86.6 million. Its backlog at the end of the third quarter was $147.1 million, down from $149.2 million at the end of the second quarter but up from $101 million last year. It upped its annual earnings view to a range of $2.12 to $2.22 a share, and still forecast revenue between $315 million and $325 million. Companies in this story  Azz Inc (AZZ)

just fyi.

AZZ profit climbs 54%, lifts FY guidance

By Steve Goldstein
Last update: 5:04 a.m. EST Jan. 4, 2008Print  RSS Disable Live Quotes

LONDON (MarketWatch) -- Electrical products maker AZZ (AZZ:azz inc com
News, chart, profile, more
Last: 30.61+1.76+6.10%

9:30am 01/04/2008

Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
AZZ 30.61, +1.76, +6.1%) said third-quarter ending Nov. 30 net income rose 54% to $8.1 million, or 66 cents a share, with revenue up 32% to $86.6 million. Its backlog at the end of the third quarter was $147.1 million, down from $149.2 million at the end of the second quarter but up from $101 million last year. It upped its annual earnings view to a range of $2.12 to $2.22 a share, and still forecast revenue between $315 million and $325 million. Companies in this story  Azz Inc (AZZ)

up 11.5%

Keep an eye on NGA

http://www.3stocksonfire.org/trading/index.php?topic=6078.0

Fundamental Analysis:

AZZ has two reporting segments, manufacturing of electrical products and galvanizing services.

The stock has been relatively strong due to the electrical products part of the business. I know (from knowing NGA reasonably well) that the market doesn't value the galvanizing services business highly, because investors price it as cyclical and they also believe the industry is at the top of its cycle. Here's what Motley Fool says on this subject:

«With little product differentiation in galvanizing, as demand rises and falls with economic activity, margins will tend to fluctuate around their long-term average. If margins were to stay unusually high for too long, expansion at AZZ and its competitors would quickly drive up supply, sending prices and margins down.»

Now, AZZ reported results for the quarter ended February 29, 2008 ...

• AZZ incorporated Reports Results for the Fourth Quarter and Fiscal-Year 2008
PR Newswire (Fri, Apr 4)

... and the electrical products segment showed a YoY decline:

«Revenues for the Electrical and Industrial Products Segment were $41.7 million for the fourth quarter, compared to $46.4 million in the previous year's fourth quarter, a decrease of 10 percent.»

Moreover, backlog declined meaningfully from the prior quarter:

«Backlog at the end of the fourth quarter was $134.9 million, compared to $147.1 million at the end of the previous quarter and $120.7 million for the fourth quarter of last year.»

The company says the following about the galvanizing segment:

«Mr. Dingus continued, "Strong market demand for galvanizing services continued and tons processed increased 18 percent for the fiscal year. Pricing levels for the fourth quarter were approximately the same as in the third quarter and margins for the fourth quarter were a robust 26 percent.»

Ok, but the historical average for margins in the galvanizing services industry is 18%, analysts say. This is why NGA is valued at just 7.6 times EPS.

AZZ gave the following guidance:

«Accounting for the favorable eleven month impact of this acquisition, we are pleased to project that our revenues for Fiscal 2009 will be within the record setting range of $365 million to $380 million and that fully diluted earnings per share will be within the record setting range of $2.28 to $2.42.»

The midpoint of the guidance for EPS is $2.35. The stock closed yesterday at $31.47, so its forward earnings multiple is 13.4.

What we have here is a company with a business segment that saw a considerable decline in revenue and another which is valued at 7 - 8 times EPS. I say AZZ's EPS multiple will be below 10 in the near future, that is, the stock will be below $23.5.

Technical Analysis:

AZZ was up more than 8 fold in a four year period and the market action since mid 2007 looks like a long term top:



AZZ was trending up before the weak quarterly results came in and was prepared to challenge the highs above $41. But it failed, so investors feel disappointed now. Support is just at $25 and I don't see how the stock will stop falling before that support is hit:



Over the short term, volume on Friday's red marubozu was very strong, with more than 2 million shares changing hands. This was a very significant day from a technical perspective and AZZ shouldn't close above the midpoint of this red day, or else the bearish case would be compromised, at least in the time frame we use here at the Technimental Portfolio.

Support will come just at $25:



Trading Plan:

SELL AZZ short around today's open. Buy to cover at the $25 support level or if the stock is set to close above $34.69.

Trading Plan:

1. Buy to cover at the $25 support level;
2. Exit with a small loss if AZZ is set to close above $34.69.

Trading Plan:

1. Buy to cover at the $25 support level;
2. Exit with a small loss if AZZ is set to close above $34.69.

Trading Plan:

1. Buy to cover at the $25 support level;
2. Exit with a small loss if AZZ is set to close above $34.69.

Trading Plan:

1. Buy to cover at the $25 support level;
2. Exit with a small loss if AZZ is set to close above $34.69.

Everything is going as planned and I have a 16.8% profit in AZZ short, so I have room to change the trading plan a bit, with the objective of not letting a nice profit turn into a meaningful loss.

Trading Plan:

1. Buy to cover at the $25 support level;
2. Exit with a small loss if AZZ is set to close above $31.

Trading Plan:

1. Buy to cover at the $25 support level;
2. Exit with a small loss if AZZ is set to close above $31.

Trading Plan:

1. Buy to cover at the $25 support level;
2. Exit with a small loss if AZZ is set to close above $31.

Trading Plan:

1. Buy to cover at the $25 support level;
2. Exit with a small loss if AZZ is set to close above $31.