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Astec Industries (ASTE) Up 1.4% 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 1.4% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Astec Q1 Earnings & Revenues Miss Estimates, Down Y/Y

Astec Industries’ first-quarter 2021 adjusted earnings per share of 41 cents missed the Zacks Consensus Estimate of 86 cents by a margin of 52%. The bottom line also declined 58% from the prior-year quarter due to an unfavorable product mix in Infrastructure Solutions segment and under absorption in Materials Solutions segment.

Including one-time items, the company reported earnings per share of 38 cents in the quarter under review compared with 91 cents in the year-ago quarter.

Revenues & Backlog

Astec reported revenues of $284 million in the quarter, down 1.5% from the year-ago quarter. Further, the top line lagged the Zacks Consensus Estimate of $315 million. Domestic sales were down 3.5% year on year due to a used inventory reduction initiative in first-quarter 2020. The sale of used inventory slumped 55.8% in the reported quarter compared with last year. International sales increased 6.9% in the quarter.

At first quarter 2021-end, the company’s total backlog was $420.8 million, reflecting an improvement of 71.5% year over year. Domestic backlog soared 74% year over year to $322.9 million, while international backlog increased 63% to $97.9 million.

Operating Performance

Cost of sales inched up 0.2% year over year to $216 million. Gross profit was $68.5 million, down 7% from the year-ago quarter figure of $73.4 million. Gross margin contracted 130 basis points to 24.1% in the quarter under review from the year-ago quarter.

Selling, general, administrative and engineering (SG&A) increased 3% year over year to around $58 million. Adjusted operating profit for the quarter under review was $10.5 million, which marked a decline of 39% from the prior-year quarter.

Adjusted operating margin was 3.7% compared with 6.0% in the prior-year quarter. The decline was due to unfavorable product mix in Infrastructure Solutions as certain international product sales carried lower margins (impacted by logistics costs) compared to domestic sales. Under absorption in the Materials Solutions segment primarily related to the movement of production from the Mequon site to other Astec sites also led to lower margins in the quarter.

Adjusted EBITDA was $18 million in the reported quarter, down 24% from the year-ago quarter. Adjusted EBITDA margin was 6.3%, a 190 basis point contraction from the prior-year quarter primarily driven by strategic sales, lower factory absorption and investments in technology.

Segment Performance

Revenues for the Infrastructure Solutions segment slipped 0.5% to $2027 million from the year-ago quarter. The segment reported a profit of $21 million compared with $17 million in the prior-year quarter.

Materials Solutions segment’s total revenues declined 4% year over year to $832 million. The segment reported a profit of $6.5 million, reflecting year-over-year increase of 8%.

Financial Position

Astec’s cash and cash equivalents improved to $164.6 million as of Mar 31, 2021 from $158.6 million as of Dec 31, 2020. As of the first quarter end, the company’s total debt was $0.3 million compared with $0.4 million as of Dec 31, 2020.

So far the company has been witnessing a ramp up in demand. However, steel prices have been on an uptrend lately and is expected to remain so for the balance of the year. Further, a tight labor market remains a concern. These factors will impact the company’s margins this year.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, Astec Industries has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.


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