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Astec (ASTE) Q3 Earnings Miss Estimates on Lower Demand

Zacks Equity Research

Astec Industries, Inc.’s ASTE third-quarter 2019 earnings per share of 17 cents missed the Zacks Consensus Estimate of 31 cents by a margin of 45%. The figure also declined 43% from the prior-year quarter, thanks to softer market conditions.

Including one-time items, earnings per share in the third quarter was 13 cents, reflecting a 57% year-over-year drop from 30 cents in the year-ago quarter.

Astec reported revenues of $255.8 million in the quarter, down 0.3% from the year-ago quarter. The top line missed the Zacks Consensus Estimate of $263 million. The company’s domestic sales decreased 2% year over year to $190 million while international sales rose 6% year over year to $66 million.

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 went up 3% year over year to $204 million. Adjusted gross profit came in at $51.9 million, down from $58.3 million in the year-ago quarter. Gross margin was 20.3% in the reported quarter compared with 22.7% in the prior-year quarter. Selling, general, administrative and engineering (SG&A) dropped 7% year over year to $48 million. The company reported adjusted operating profit of $4.22 million, declining 42% from the prior-year quarter figure of $7.23 million.

Segment Performance

Revenues for the Infrastructure Group segment improved 1.3% to $88 million from the year-ago quarter. The segment reported an operating loss of $0.4 million compared with an operating profit of $4.8 million in the year-ago quarter.

Total revenues for the Aggregate and Mining Group segment went down 2% year over year to $99.6 million. Operating profit slumped 36% year over year to $5.8 million.
 
The Energy Group segment’s total revenues increased 0.2% year over year to $68 million. The segment reported operating profit of $5.1 million, up 54% from $3.3 million in the year-ago quarter.
 
Financial Position
 
Astec reported cash and cash equivalents of $26.3 million at the end of third-quarter 2019, up from $25.7 million at the end of the prior-year quarter. Receivables declined to $114 million as of Sep 30, 2019, from $128 million as of Sep 30 2018. Inventories were at $357 million as of third-quarter 2019-end, compared with $429 million as of second-quarter 2018-end.
 
The company’s total backlog declined around 21% year-over-year to $244 million as of Sep 30, 2019. Backlog plunged 29%, 27% and 12% in the Energy, Aggregate and Mining Group and Infrastructure Group, respectively. While domestic backlog plunged 29% year over year to $158 million as of third-quarter 2019-end, international backlog remained flat at $85.8 million.

Astec is actively aligning the business to meet the current 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. Meanwhile, its international strategy will help in accelerating revenue growth.

Share Price Performance

Astec’s shares have fallen 10.3% in the past year, against the industry‘s growth of 13.2%.
 
Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the Industrial Products sector are Dover Corporation DOV, Cintas Corporation CTAS and Brady Corporation BRC, each carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dover Corporation has an estimated earnings growth rate of 17.71% for 2019. The company’s shares have gained 27% in the past year.

Cintas has an expected earnings growth rate of 12.74% for the current year. The stock has appreciated 51% in a year’s time.

Brady Corporation has a projected earnings growth rate of 4.34% for the ongoing year. The company’s shares have rallied 45% over the past year.

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