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Here's Why Hold Strategy is Apt for Astec (ASTE) Stock Now

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Astec Industries, Inc. (ASTE - Free Report) is poised well to gain on its strategy for profitable growth — Simplify, Focus and Grow. 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 contribute to the bottom line.

The leading manufacturer and marketer of road building equipment has a market capitalization of $1.3 billion. Shares of the company have gained 41% year to date compared with the industry’s growth of 17.4%.



Astec has a Zacks Rank #3 (Hold) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3, offer the best investment opportunities for investors.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Solid Q3 Results: Astec’s third-quarter 2020 adjusted earnings per share of 20 cents improved 18% from the prior-year quarter. The improvement was driven by the company’s transformation initiatives taken in 2019 and 2020, which offset the impact of lower revenues amid the coronavirus crisis.

Positive Earnings Surprise History: The company has a trailing four-quarter earnings surprise of 156%, on average.

Positive Growth Estimates: The Zacks Consensus Estimate for 2020 earnings per share is pegged at $1.87, suggesting growth of 20.7% from the prior year. The consensus mark for 2021 earnings stands at $2.54, indicating year-over-year improvement of 36%.

Reasonable Valuation: Astec’s forward 12-month P/E ratio is 23.9, while the industry's forward 12-month P/E ratio is 24.4. Consequently, the stock is cheaper at this point based on the ratio.

Return on Assets (ROA): Astec currently has a ROA of 6.3%, while the industry's ROA is 4.7%. An above-average ROA denotes that the company is generating earnings by effectively managing assets.

Strong Balance Sheet: Astec’s total debt is 0.1% of total capital, much lower than its industry's 71.8%. The company ended third-quarter 2020 with total available liquidity of $260 million, which includes cash and cash equivalents of $108.5 million. Thus, with a strong balance sheet and liquidity position, Astec seems well poised to tide over these turbulent times.

Simplify, Focus and Grow Strategy: Astec remains focused on its strategy for profitable growth — Simplify, Focus and Grow. In sync with this, its transition to a two-segment organizational structure ensures that its products are better aligned to end markets and customers. This move helps streamline its reporting structure. The company has sold GEFCO business that effectively eliminates its exposure to the energy industry. Astec is in the process of closing its Mequon, WI location, which will enable the company to leverage its presence more efficiently. On Oct 5, 2020, the company sold the remaining of water well assets of its Enid business unit.

Acquisitions to Drive Growth: Astec is looking for avenues to grow regionally in attractive markets. The buyout of two premier full-line concrete batch plant manufacturers — CON-E-CO and BMH 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.
 
Sales Growth Drivers Intact: 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.

Other Stocks to Consider

Some better-ranked stocks in the Industrial Products sector include Crown Holdings, Inc. (CCK - Free Report) , iRobot Corporation (IRBT - Free Report) and SiteOne Landscape Supply, Inc. (SITE - Free Report) . While Crown Holdings and iRobot flaunt a Zacks Rank #1, SiteOne Landscape carries a Zacks Rank of 2, at present.

Crown Holdings has a projected earnings growth rate of 11.7% for fiscal 2020. Year to date, the company’s shares have appreciated 32%.

iRobot has an estimated earnings growth rate of 18.8% for the ongoing year. Shares of the company have gained 55% year to date.

SiteOne Landscape has an expected earnings growth rate of 28.6% for 2020. The stock has climbed 48% year to date.

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