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Astec (ASTE) Surges 21% YTD: What's Driving the Rally?

Zacks Equity Research
·4 min read

Astec Industries, Inc. ASTE is poised well to gain from its strategy for profitable growth — Simplify, Focus and Grow. While launch of new products, acquisitions, efforts to grow part sales volumes and international business will continue to drive the top line, savings from cost-reduction actions, restructuring and reorganization initiatives will aid the bottom line. The company’s shares have gained 21% so far this year, against the industry’s decline of 2.8%. Notably, the S&P 500 rallied 2.5% in the said period.

Astec has a market capitalization of $1.15 billion. Average volume of shares traded in the past three months was 145.17k.
 
Let’s delve deeper and analyze the factors driving the stock.

Driving Factors

Astec’s second-quarter 2020 adjusted earnings per share of 67 cents beat the Zacks Consensus Estimate by a whopping margin of 458%. The bottom also 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. Notably, the company has a trailing four-quarter earnings surprise of 124.3%, on average.

 

The company is making steady progress toward its strategy for profitable growth – Simplify, Focus and Grow. In the second quarter, Astec announced the closure of its Mequon, WI location, which will enable the company to leverage its presence more efficiently. It also recently announced the buyouts of two premier full-line concrete batch plant manufacturers — CON-E-CO and BMH. Both the buyouts will significantly strengthen the Infrastructure Solutions group portfolio and provide customers with access to the most robust line of concrete products in the infrastructure industry.

Astec also remains committed to introducing new products in the market and growing its part sales volume over the long term. Moreover, the company continues to focus on augmenting international sales through the establishment of newer regional international sales offices and fresh products for international customers.

The company also remains focused on implementing initiatives to reduce expenses and conserve cash amid the coronavirus pandemic. These actions include hiring suspension (except for critical positions), reduction in workforce and cutting down discretionary spending. Further, Astec’s total debt is 0.1% of total capital, much lower than its industry's 73.6%. Its times interest earned ratio is at 9.5, higher than the industry’s 5.7. Thus, with a strong balance sheet and liquidity position, Astec seems well poised to tide over these turbulent times.

Positive Growth Projections

Over the past 60 days, the Zacks Consensus Estimate for 2020 earnings and 2021 earnings have been revised upward by 50% and 48%, respectively. The Zacks Consensus Estimate for its 2020 earnings per share is pegged at $1.76, suggesting growth of 13.6% from the prior-year quarter. The consensus mark for 2021 earnings stands at $2.62, indicating year-over-year improvement of 48.7%.

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 include SiteOne Landscape Supply, Inc. SITE, Fortune Brands Home Security, Inc. FBHS and Superior Uniform Group, Inc. SGC. All of these stocks carry a Zacks Rank of 1, currently.

SiteOne Landscape has an expected earnings growth rate of 18.7% for the current year. The stock has surged 31% so far this year.

Fortune Brands Home has a projected earnings growth rate of 6.2% for fiscal 2020. So far this year, the company’s shares have gained 27%.

Superior Uniform Group has a projected earnings growth rate of 13.4% for fiscal 2020. The company’s shares have appreciated 65% year to date.

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Astec Industries, Inc. (ASTE) : Free Stock Analysis Report
 
Fortune Brands Home Security, Inc. (FBHS) : Free Stock Analysis Report
 
Superior Uniform Group, Inc. (SGC) : Free Stock Analysis Report
 
SiteOne Landscape Supply, Inc. (SITE) : Free Stock Analysis Report
 
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