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Why Is Astec Industries (ASTE) Up 9.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Astec Industries (ASTE - Free Report) . Shares have added about 9.1% in that time frame, outperforming the S&P 500.

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

Astec Q3 Earnings Miss Estimates on Lower Demand

Astec Industries 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.

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.
 

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months. The consensus estimate has shifted -28.38% due to these changes.

VGM Scores

At this time, Astec Industries has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Outlook

Astec Industries has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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