On June 24, we issued an updated research report on Astec Industries, Inc. ASTE. The company is poised well to gain from focus on new products, efforts to grow part sales volumes and international business. Savings from strategic sourcing improvement, cost-reduction actions and restructuring efforts will aid margins.
Focused on Growing Part Sales & International Operations
Astec remains committed toward improvement of its part sales volume over the long term. It also intends to improve competitive part and service sales. Majority of customers in the United States have been experiencing a stable product market, and the company remains focused on selling existing and new products. It also continues to focus on growing international sales through the establishment of new regional international sales offices and the new products for international customers. Astec remains well poised in the long term backed by the global population growth, increased urbanization and the need to repair the ageing infrastructure.
Anticipated Savings From Strategic Sourcing Improvement
Astec anticipates savings from strategic sourcing improvement to grow through the balance of the year as it completes engineering validation of new vendors and components, and depletes inventory of existing components and material. The company’s new sales and operational planning procedures are leading to changes in its bill schedules. Following the changes, it expects higher cash generation in the days ahead courtesy of better management of building equipment and controlling inventory to match demand. Astec is actively aligning business to meet demand. The company also introduced its strategy for profitable growth – Simplify, Focus and Grow. The implementation of the Sales and Operations Planning process will help the company in dealing with the changing market scenario.
The company’s transition to a two-segment organizational structure ensures that its products are better aligned to end markets and customers. This move helps streamline the company’s reporting structure as it is in the process of selling the GEFCO business that effectively eliminates its exposure to the energy industry.
Solid Balance Sheet: An Added Positive
Astec ended first-quarter 2020 with total available liquidity of $186 million, which includes cash and cash equivalents of $44 million. The company expects $26 million cash from income-tax refund due to the CARES Act. Its total debt stood at $1.2 million as of Mar 31, 2020. Its total debt is 0.1% of total capital, much lower than its industry's 72%. Its times interest earned ratio is at 30.8, higher than the industry’s 7.0. Thus, with a strong balance sheet and liquidity position, Astec seems well positioned to navigate through these turbulent times.
In the wake of the coronavirus pandemic, the company continues to implement actions to reduce expenses and conserve cash. These actions include hiring suspension (except for critical positions), reduction in workforce and cutting down discretionary spending.
Over the past year, shares of Astec have surged 42% against the industry’s decline of 11%.
Zacks Rank & Other Stocks to Consider
Astec currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Some other top-ranked stocks in the Industrial Products sector are Lakeland Industries, Inc. LAKE, SiteOne Landscape Supply, Inc. SITE and Axon Enterprise, Inc. AAXN. While Lakeland Industries and SiteOne Landscape Supply sport a Zacks Rank #1, Axon carries a Zacks Rank of 2 (Buy), at present.
Lakeland Industries has a projected earnings growth rate of 418% for 2020. The company’s shares have soared 122% in the past year.
SiteOne Landscape Supply has an expected earnings growth rate of 15% for the current year. The stock has appreciated 19% in a year’s time.
Axon has an estimated earnings growth rate of 14.4% for the ongoing year. The company’s shares have rallied 28% in the past year.
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Astec Industries, Inc. (ASTE) : Free Stock Analysis Report
Lakeland Industries, Inc. (LAKE) : Free Stock Analysis Report
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