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Astec Industries (ASTE) Up 8.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Astec Industries (ASTE - Free Report) . Shares have added about 8.4% 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 catalysts.

Astec Q4 Earnings Surpass Estimates, Improve Y/Y

Astec’s fourth-quarter 2020 adjusted earnings per share of 56 cents beat the Zacks Consensus Estimate of 42 cents by a margin of 33%. The bottom line also improved 56% 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 67 cents in the quarter under review against a loss per share of 81 cents in the year-ago quarter.

Revenues & Backlog

Astec reported revenues of $239 million in the quarter, down 16% from the year-ago quarter’s figure of $283 million. However, the top line missed the Zacks Consensus Estimate of $273 million. Due to COVID-19-related disruptions, domestic and international sales declined 14% and 20%, respectively, on a year-over-year basis.
 
At fourth quarter-end, the company’s total backlog was $360.5 million, reflecting an improvement of 37% year over year. While domestic backlog surged 44% year over year to $280.6 million, international backlog increased 15% to $79.9 million.

Operating Performance

Adjusted cost of sales plunged 19% year over year to $182 million. Adjusted gross profit was $57 million, down 5% from the year-ago quarter figure of $60 million. Gross margin, however, expanded 260 basis points to 23.8% in the quarter under review compared with 21.2% in the year-ago quarter.

Selling, general, administrative and engineering (SG&A) declined 21.5% year over year to around $41 million, due to reductions in consulting fees, travel and employee expenses. Adjusted operating profit for the quarter under review was $15.7 million, which improved a substantial 109% from the prior-year quarter. Adjusted operating margin was 6.6% compared with 2.6% in the prior-year quarter, courtesy of operational efficiencies that helped offset the impact of lower sales.
 
Adjusted EBITDA was $23.3 million in the reported quarter, up 69% from the year-ago quarter. Adjusted EBITDA margin was 9.8%, a 500 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 13% to $167 million from the year-ago quarter. The segment reported an adjusted gross profit of $39.5 million compared with $41 million in the prior-year quarter.
Materials Solutions segment’s total revenues slumped 22% year over year to $72 million. The segment reported an adjusted gross profit of $17.7 million, reflecting year-over-year increase of 2%.

Financial Position

Astec’s cash and cash equivalents significantly improved to $159 million as of Dec 31, 2020 from $49 million as of Dec 31, 2019. As of 2020-end, the company’s total debt was $2 million. It has available liquidity of more than $312.4 million as of Dec 31, 2020.

2020 Results

Astec’s adjusted earnings per share in 2020 was $2.38, a 54% improvement from the prior-year’s figure of $1.55. The bottom line beat the Zacks Consensus Estimate of $1.87. Including one-time items, the company delivered an earnings per share of $2.05 in 2020 compared with 98 cents in 2019. Sales declined 12% year over year to $1.02 billion and missed the Zacks Consensus Estimate of $1.06 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Astec Industries has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Astec Industries has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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