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Astec Industries (ASTE) Up 18.5% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Astec Industries (ASTE - Free Report) . Shares have added about 18.5% 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 its most recent earnings report in order to get a better handle on the important drivers.

Astec Q3 Earnings and Revenues Surpass Estimates

Astec Industries’ third-quarter 2020 adjusted earnings per share of 20 cents beat the Zacks Consensus Estimate of 11 cents by margin of 82%. The bottom line also improved 18% from the prior-year quarter. The better-than-expected results were driven by the company’s transformation initiatives taken in 2019 and 2020, which offset the impact of lower revenues amid the coronavirus crisis.

Including one-time items, the company reported earnings per share of 7 cents in the quarter under review, down 46% from 13 cents in the year-ago quarter.

Revenues & Backlog

Astec reported revenues of $231 million in the quarter, down 9.5% from the year-ago quarter’s figure of $256 million. However, the top line surpassed the Zacks Consensus Estimate of $228 million. Net sales decreased 8.5%, excluding the impact of foreign currency. Owing to COVID-19-related disruptions, domestic and international sales declined 4.5% and 24%, respectively, on a year-over-year basis.

At third quarter-end, the company’s total backlog was $218.5 million, reflecting a decline of 10% year over year thanks to the impact of the COVID-19 pandemic. Orders in both Materials and Infrastructure Solutions segments were down 8.5% and 11.3%, respectively. While domestic backlog dipped 4% year over year to $151.3 million, international backlog plunged 22% to $67.2 million.

Operating Performance

Adjusted cost of sales declined 12.5% year over year to $178 million. Adjusted gross profit was $53 million, up 2% from the year-ago quarter figure of $52 million. Gross margin expanded 260 basis points year over year to 22.9% in the reported quarter.

Selling, general, administrative and engineering (SG&A) increased 2.5% year over year to around $49 million, due to the acquisitions of BMH Systems and CON-E-CO. Adjusted operating profit for the quarter under review was $4.1 million, which declined around 2% from the prior-year quarter. Adjusted operating margin was 1.8% compared with 1.6% in the prior-year quarter courtesy of operational efficiencies that helped offset the impact of lower sales.
 
Adjusted EBITDA was $11 million in the reported quarter, up 2% from the year ago quarter.  Adjusted EBITDA margin was 4.8%, a 60 basis point expansion from the prior-year quarter. Despite lower sales, the company’s restructuring initiatives benefited margins in the quarter.

Segment Performance

Revenues for the Infrastructure Solutions segment decreased 3% to $151 million from the year-ago quarter. The segment reported an adjusted gross profit of $32 million compared with $31 million in the prior-year quarter.

Materials Solutions segment’s total revenues decreased 19% year over year to $80 million. The segment reported an adjusted gross profit of around $21 million, reflecting a year-over-year decrease of 1%.

Financial Position

Astec’s cash and cash equivalents were around $109 million as of Sep 30, 2020, up from $49 million as of Dec 31, 2019. As of third-quarter 2020-end, the company’s long-term debt was $1.4 million. It has available liquidity of more than $260 million as of Sep 30, 2020.

The company acquired two premier full-line concrete batch plant manufacturers — CON-E-CO and BMH in the reported quarter. Both the buyouts 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.

Astec is undertaking initiatives to counter the financial and operational impacts of COVID-19. These steps include reducing expenses, conserving cash, suspending hiring except for critical positions, cutting down discretionary spending and overall headcount reduction.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted 5.88% due to these changes.

VGM Scores

At this time, Astec Industries has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 looks promising. 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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