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Astec (ASTE) Q2 Earnings and Revenues Surpass Estimates

Zacks Equity Research
·4 min read

Astec Industries, Inc.’s ASTE second-quarter 2020 adjusted earnings per share of 67 cents beat the Zacks Consensus Estimate of 12 cents by a wide margin. The bottom line also improved 81% from the prior-year quarter. The better-than-expected results were driven by the company’s restructuring initiatives taken in 2019 and 2020, which offset the impact of lower revenues amid the coronavirus crisis.

Including one-time items, the company reported earnings per share of 41 cents in the quarter under review, down 60% from $1.03 in the year-ago quarter.

Astec reported revenues of $265 million in the quarter, down 6.8% from the year-ago quarter’s adjusted figure of $285 million. However, the top line surpassed the Zacks Consensus Estimate of $236 million. Including $20 million from sale of a wood pellet plant in the prior-year quarter, revenues in the second quarter of 2020 declined 13%. In the reported quarter, the company’s both domestic and international sales declined 10% and 25%, respectively, on a year-over-year basis owing to COVID-19-related disruptions.

Astec Industries, Inc. Price, Consensus and EPS Surprise

Astec Industries, Inc. Price, Consensus and EPS Surprise
Astec Industries, Inc. Price, Consensus and EPS Surprise

Astec Industries, Inc. price-consensus-eps-surprise-chart | Astec Industries, Inc. Quote

Cost of sales declined 8% year over year to $204 million. Adjusted gross profit was $62 million, down 3% from the year-ago quarter figure of $63 million. Gross margin was 23.2% in the reported quarter compared with the prior-year quarter’s 22.2%.

Selling, general, administrative and engineering (SG&A) decreased 19% year over year to $43 million, driven by reductions in consulting fees, travel and employee expenses. Adjusted operating profit for the quarter under review was $18.8 million, which improved 78% from the prior-year quarter’s $10.5 million. Adjusted operating margin was 7.1% compared with 3.7% in the prior-year quarter courtesy of transformation initiatives put in place beginning in late 2019.

Adjusted EBITDA was $25 million in the reported quarter, up 47% from $17 million a year ago.  Adjusted EBITDA margin was 9.5% compared with 6.0% in the prior-year quarter. Despite lower sales, the company’s restructuring initiatives benefited margins in the quarter.

Segment Performance

Revenues for the Infrastructure Solutions segment increased 2% to $182 million from the year-ago quarter. The segment reported an adjusted EBITDA of $22.6 million compared with $12.5 million in the prior-year quarter.

Materials Solutions segment’s total revenues decreased 21% year over year to $83 million. The segment reported an adjusted EBITDA of $12.1 million, reflecting year-over-year increase of 7%.

Financial Position

Astec reported cash and cash equivalents of $119.8 million as of Jun 30, 2020, up from $24.9 million as of Jun 30, 2019. As of second-quarter 2020-end, total debt was $1.4 million. The company has available liquidity in excess of $270.6 million as of Mar 31, 2020.

The company’s total backlog fell 26% year over year to $182 million as of Jun 30, 2020. Orders in Materials and Infrastructure Solutions segments were down 17.3% and 30.9%, respectively. While domestic backlog slumped 21% year over year to $128 million, international backlog plunged 37% to $54 million.

Astec is undertaking initiatives to counter the financial and operational impacts of COVID-19. These steps include reducing expenses, conserving cash, suspending hiring, except for critical positions, lowering discretionary spending and overall headcount reduction.

Share Price Performance

Astec’s shares have gained 23.7% in the three months, compared with the industry‘s growth of 20.8%.

Zacks Rank & Stocks to Consider

Astec currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector include Silgan Holdings, Inc. SLGN, IIVI Incorporated IIVI and SiteOne Landscape Supply, Inc. SITE. All of these stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Silgan has a projected earnings growth rate of 28.7% for the current year. The company’s shares have gained 13% in the past three months.

IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 46% in three months’ time.

SiteOne Landscape Supply has an expected earnings growth rate of 6.2% for 2020. The stock has surged 37% over the past three months.

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