AAON (NASDAQ:AAON) vs. AZZ (NYSE:AZZ) Critical Analysis

AZZ (NYSE:AZZ) and AAON (NASDAQ:AAON) are both mid-cap industrials companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, dividends, profitability, valuation, analyst recommendations, institutional ownership and earnings.

Profitability

This table compares AZZ and AAON’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AZZ	11.83%	14.18%	8.48%
AAON	7.30%	13.67%	7.52%

Volatility & Risk

AZZ has a beta of 1.12, suggesting that its stock price is 12% more volatile than the S&P 500. Comparatively, AAON has a beta of 1.45, suggesting that its stock price is 45% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations and price targets for AZZ and AAON, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AZZ	0	3	4	0	2.57
AAON	0	3	4	0	2.57

AZZ presently has a consensus target price of $155.25, suggesting a potential upside of 0.67%. AAON has a consensus target price of $126.67, suggesting a potential upside of 46.76%. Given AAON’s higher probable upside, analysts plainly believe AAON is more favorable than AZZ.

Earnings & Valuation

This table compares AZZ and AAON”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AZZ	$1.65 billion	2.81	$317.26 million	$6.56	23.51
AAON	$1.44 billion	4.90	$107.59 million	$1.43	60.36

AZZ has higher revenue and earnings than AAON. AZZ is trading at a lower price-to-earnings ratio than AAON, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

90.9% of AZZ shares are held by institutional investors. Comparatively, 70.8% of AAON shares are held by institutional investors. 1.7% of AZZ shares are held by company insiders. Comparatively, 18.1% of AAON shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

AZZ pays an annual dividend of $0.96 per share and has a dividend yield of 0.6%. AAON pays an annual dividend of $0.40 per share and has a dividend yield of 0.5%. AZZ pays out 14.6% of its earnings in the form of a dividend. AAON pays out 28.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. AAON has increased its dividend for 2 consecutive years. AZZ is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

AZZ beats AAON on 9 of the 15 factors compared between the two stocks.

About AZZ

AZZ Inc. provides hot-dip galvanizing and coil coating solutions in North America. It offers metal finishing solutions for corrosion protection, including hot-dip galvanizing, spin galvanizing, powder coating, anodizing, and plating to steel fabrication and other industries, as well as to fabricators or manufacturers that provide services to the transmission and distribution, bridge and highway, petrochemical, and general industrial markets; and original equipment manufacturers. It also provides aesthetic and corrosion protective coatings and related value-added services for steel and aluminum coil primarily serving the construction; appliance; heating, ventilation, and air conditioning; container; transportation; and other end markets. The company was incorporated in 1956 and is headquartered in Fort Worth, Texas.

About AAON

AAON, Inc., together with its subsidiaries, engages in engineering, manufacturing, marketing, and selling air conditioning and heating equipment in the United States and Canada. The company operates through three segments: AAON Oklahoma, AAON Coil Products, and BASX. It offers rooftop units, data center cooling solutions, cleanroom systems, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, coils, and controls. The company markets and sells its products to retail, manufacturing, educational, lodging, supermarket, data centers, medical and pharmaceutical, and other commercial industries. It sells its products through a network of independent manufacturer representative organizations and internal sales force, as well as online. The company was incorporated in 1987 and is based in Tulsa, Oklahoma.