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Astec (ASTE) Announces Design Upgrades in Wood Pellet Plants

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Astec Industries, Inc. (ASTE - Free Report) has commenced significant design upgrades at its Georgia and Arkansas wood pellet plants which need additional investment. Though the investment will hurt the company’s third-quarter earnings by 54-58 cents per share, it will drive growth over the long term.

Astec has identified design issues at the Georgia and Arkansas wood pellet plants after full assessment over the last 45 days. Further, the company stated that both facilities need to operate at full capacity as production has increased.

Notably, the design flaws were different at each plant. Astec needs to change the fuel source at its Georgia Plant from natural gas to wood to run it at full capacity. Also, major design issues were recognized at the company’s Highland Pellets plant in Arkansas.

Revenues of Astec’s Infrastructure Group segment, which manufacture and market wood pellet plants, declined 6.1% and profit plunged 49.7% year over year during the second quarter. For 2017, the company remains optimistic with regard to the Infrastructure Group's outlook on infrastructure related equipment. However, it remains optimistic on wood pellet plants in the group.

Astec’s shares have significantly underperformed the industry with respect to price performance in the past year as it remained affected by low oil prices, volatile steel prices, and tepid economic and political environment in Brazil. The stock has declined 6.4%, as against 44.2% growth registered by the industry.



Zacks Rank & Stocks to Consider

Currently, Astec has a Zacks Rank #4 (Sell).

Better-ranked stocks in the same sector include China National Materials Company Limited , KION GROUP AG (KIGRY - Free Report) and Komatsu Ltd. (KMTUY - Free Report) . All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

China National Materials has an expected long-term earnings growth rate of 20%.

KION GROUP has an expected long-term earnings growth rate of 7%.

Komatsu has an expected long-term earnings growth rate of 12.7%.

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