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Astec (ASTE) to Report Q2 Earnings: What's in the Offing?

Zacks Equity Research

Astec Industries, Inc. ASTE is scheduled to report second-quarter 2019 results, before the opening bell on Jul 23.

The Zacks Consensus Estimate for the June-end quarter earnings is pinned at 42 cents, underlining a year-over-year slump of 59.2%. Notably, the Zacks Consensus Estimate for total sales of $305 million represents year-over-year growth of 11.7%. Further, the Zacks Consensus Estimate for earnings remained stable over the past 30 days.

Let’s see how things are shaping up prior to this announcement.

Key Factors to Consider

Astec is poised to gain from strategic sourcing and inventory management. The company projects savings from strategic sourcing improvement to add approximately 2% to its gross margin in current year and free up $25 million in cash as a result of better inventory management. However, it expects elevated SG&A expenses during the quarter to be reported, due to ongoing implementation of the strategic sourcing initiative and inventory management. The company is also facing input cost inflation, particularly of steel owing to the imposition of tariffs.
 
Favorable end markets bode well for Astec. Improving mining and construction markets and higher infrastructure spending will likely bolster Astec’s top-line performance. Furthermore, Astec will benefit from cost-structure optimization and focus on capital-allocation strategy.

Notably, Astec focuses on improvement of part sales volume. It also intends to improve its competitive part sales and service sales. Majority of its customers in the United States have been witnessing a stable product market, and the company remains focused on selling existing and new products. Also, the company’s continued efforts to grow its international business will propel growth.

At first quarter 2019-end, Astec’s total backlog plunged 38% year over year to $380 million. Backlog plunged 52%, 31% and 25% in the Infrastructure Group, Energy group and Aggregate and Mining Group, respectively. This does not bode well for second quarter top-line performance. Astec thus anticipates a year-over-year decline of 5-15% in revenues for the second quarter. It projects second-quarter gross margins of 22-23% and operating margins at 3.5-5.5%. Earnings per share is expected in the band of 40-50 cents compared to $1.03 in the year-ago quarter.

Astec Industries, Inc. Price and Consensus

Astec Industries, Inc. Price and Consensus

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

Earnings Whispers

Our proven model does not conclusively show that Astec is likely to beat on earnings in this quarter as it lacks the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. This is not the case here as you will see below:

Earnings ESP: The Earnings ESP for Astec is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at 42 cents, currently. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Astec currently carries a Zacks Rank of 3, which increases the predictive power of ESP. But we also need to have a positive earnings ESP to be sure of an earnings beat.

It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are few companies that you may want to consider, as our model shows these too have the right combination of elements to post an earnings beat this quarter:

Sealed Air Corporation SEE has an Earnings ESP of +1.34% and carries a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

AptarGroup, Inc. ATR, another Zacks #2 Ranked stock, has an Earnings ESP of +0.56%.

Terex Corporation TEX has an Earnings ESP of +0.82% and carries a Zacks Rank #3, currently.

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