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Astec Beats EPS, Misses Sales

ASTE CAT

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Astec Industries Inc. (ASTE - Analyst Report) has reported fourth quarter results, delivering an adjusted EPS of 41 cents versus 28 cents in the year-earlier quarter, beating the Zacks Consensus Estimate of 39 cents.

The earnings per share in the reported quarter excluded charges related to the sale of the utility trencher product line in the Underground segment. The fourth quarter 2010 EPS excluded asset impairment charges. Including these charges, EPS amounted to 35 cents for the fourth quarter of 2011 compared with 26 cents in the fourth quarter of 2010.

Total revenue increased 38% to $263.2 million from $190.8 million in the year-ago quarter. Total revenue missed the Zacks Consensus Estimate of 228 million.

Domestic sales of the company amounted to $147.1 million in the quarter compared with $119.6 million in the year-earlier quarter. International sales increased to $116.0 million from $71.2 million in the year-ago quarter.

Fiscal 2011 Performance

In 2011, adjusted EPS increased 22% to $1.86 from 62 cents per share in 2010. Adjusted EPS beat the Zacks Consensus Estimate of $1.84.

Adjusted EPS in 2011 excluded charges related to the sale of utility trencher product line and an impairment charge. Adjusted EPS in 2010 included asset impairment charges. Including these charges, EPS amounted to $1.74 in the year 2011 compared with $1.42 in the year 2010.

Total revenue increased 24% to $955.7 million in 2011 from $771.3 million in 2010. Total revenue comfortably surpassed the Zacks Consensus estimate of $920 million.

Costs and Margins

Cost of sales increased 42% to $207.4 million in the quarter from $146.5 million in the prior-year quarter. Gross profit increased 26% to $55.7 million from $44.3 million in the year-ago quarter. However, gross margins decreased 200 basis points year over year to 21.2% in the quarter.

Selling, general, administrative & engineering expenses rose to $43.5 million in the reported quarter from $36.3 million in the year-earlier quarter. Income from operations also increased to $12.3 million from $8.0 million in the year-ago quarter. Consequently, operating margins increased 50 basis points year over year to 4.7%.

Segment Performance

Total revenue in the Asphalt Group segment amounted to $68.0 million, up from $45.5 million in the year-ago quarter. Gross profit increased to $16.7 million from $9.9 million in the prior-year quarter.

Net sales of Aggregate and Mining Group segment were $84.6 million in the quarter, up from $70.2 million in the previous-year quarter. Gross profit also increased to $21.6 million in the quarter from $17.5 million in the prior-year quarter.

Mobile Asphalt Paving Group segment reported total revenue of $45.4 million versus $40.4 million in the year-ago quarter. Gross profit during the quarter dropped to $10.8 million from $11.4 million in the year-earlier quarter.

Underground Group reported net sales of $26.2 million versus $18.3 million in the year-over-year quarter. Gross profit declined $643,000 from $1.95 million in the previous-year quarter.

All Others segment reported total revenue of $38.9 million, improving from $16.3 million in the year-earlier quarter. However, gross profit declined to $6.1 million from $3.5 million in the year-ago quarter.

Financial Position          

As of December 31, 2011, cash and cash equivalents amounted to $57.5 million, a decline from $94.6 million as of December 31, 2010. The company has a zero debt balance sheet. Astec’s backlog increased to $148.0 million at the end of fourth quarter of 2011 from $111.0 million at the end of fourth quarter of 2010.

Our Take

Astec has completed the acquisition of two companies and started a new joint venture in Brazil. It has also bought two new facilities and expanded three facilities. Alongside it has negotiated the sale of the utility product line and developed a many new products.

A large number of Astec’s customers depend substantially on government funding for highway construction and maintenance, along with other infrastructure projects. With no progress in the reauthorization of the Highway Bill, the outlook for domestic sales looks bleak.

The company currently has a Zacks #4 Rank (short-term Sell recommendation) on its stock.

Chattanooga, Tennessee–based Astec Industries is a leading manufacturer and marketer of road building equipment. The company sells equipment used in all phases of road building, from quarrying and crushing the aggregate to applying the asphalt. The company also sells equipment and components unrelated to road construction.

Operating through four segments like Aggregate and Mining Group, Asphalt Group, Mobile Asphalt Group and Underground Group., Astec competes with Caterpillar Inc. (CAT - Analyst Report), Gencor Industries Inc. and privately held CMI Terex Corporation.

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