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Why Is Astec Industries (ASTE) Down 1.1% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Astec Industries (ASTE). Shares have lost about 1.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Astec Industries due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Astec's Q4 Earnings Miss, Revenues Beat Estimates
   
Astec Industries reported fourth-quarter 2018 earnings per share of 61 cents, up 7% from the prior-year quarter but fell marginally short of the Zacks Consensus Estimate of 62 cents. Including one-time items, the company reported a loss of $2.08 per share against the prior-year quarter’s earnings of 47 cents.
 
Astec reported adjusted revenues of $317 million in the quarter, up 3% from the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $315 million. The company’s domestic sales increased 1.1% year over year to $248 million. International sales increased 2.8% year over year to $69 million.
 
Adjusted cost of sales remained flat at $241 million. Adjusted gross profit came in at $76 million, up 15% from the year-ago quarter. Gross margin expanded 240 basis points to 24%.
 
Selling, general, administrative and engineering expenses surged 22% year over year to $55 million. The company reported adjusted operating profit of $21.2 million, declining 1.1% from $21.4 million recorded in the prior-year quarter.

Segment Performance
 
Revenues for the Infrastructure Group segment declined 15% to $125 million from $147 million in the year-ago quarter. The segment reported an operating loss of $70 million, against operating profit of $11 million witnessed in the year-earlier quarter.
 
Total revenues for the Aggregate and Mining Group segment went up 20% year over year to $116 million. Operating profit soared 69% year over year to $10.8 million.
 
The Energy Group segment’s total revenues jumped 10% year over year to $76 million. The segment reported operating loss of $13 million against operating profit of $5.9 million in the year-ago quarter.
 
2018 Results
 
Astec reported adjusted earnings per share of $2.92 in 2018, up 17% from $2.49 in the prior year. Earnings beat the Zacks Consensus Estimate of $2.83. Including one-time items, the company reported a loss of $2.64 per share against earnings of $1.63 per share in the prior-year. Adjusted sales grew 6% year over year to $1.25 billion from 2017. The top line surpassed the Zacks Consensus Estimate of $1.24 billion.
 
Financial Position
 
Astec reported cash and cash equivalents of $26 million at the end of 2018, down from $62 million witnessed at the end of the prior-year. Receivables increased to $134 million as of Dec 31, 2018, from $120 million as of Dec 31, 2017. Inventories were at $356 million as of 2018-end, compared with $120 million as of 2017-end.
 
The company’s total backlog declined around 16% to $345 million as of Dec 31, 2018, from $412 million as of Dec 31, 2017. Backlog improved 12% and 18% in the Aggregate and Mining Group and Energy group, respectively. Backlog in the Infrastructure Group plunged 38%. Domestic backlog decreased 22% year over year to $261 million as of 2018-end, and international backlog advanced 12% year over year to $84 million at the end of the reported quarter.
 
In addition to focusing on execution in its individual segments, the company will continue to make progress in its strategic sourcing initiative and anticipates it to yield positive results in the procurement operations once it is concluded in the second quarter. Astec is also working toward identifying further manufacturing cost optimization opportunities.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -9.39% due to these changes.

VGM Scores

Currently, Astec Industries has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Astec Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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