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Astec Industries (ASTE) Up 0.7% 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 0.7% in that time frame, underperforming 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 drivers.

Astec Q2 Earnings In Line, Revenues Miss Estimates

Astec reported second-quarter 2021 adjusted earnings per share of 49 cents, which matched the Zacks Consensus Estimate. The bottom line declined 27% from the prior-year quarter. Despite higher year-over-year revenues in the quarter, the company witnessed a decline in its bottom line due to cost inflation and its centralization, and infrastructure efforts, which was partially offset by manufacturing efficiencies.

Including one-time items, the company reported earnings per share of 39 cents in the quarter under review compared with 41 cents in the year-ago quarter.

Revenues & Backlog

Astec’s revenues of $278 million in the quarter were up 5% from the year-ago quarter driven by contributions from acquisitions. However, the top line missed the Zacks Consensus Estimate of $311 million. Domestic sales were down 9.2% year over year due to lower volumes. International sales surged 75.7% in the quarter courtesy of increased activity in Europe, Canada, Mexico and Australia.

At second quarter 2021-end, the company’s total backlog was a record $436.1 million, reflecting a significant improvement of 140% year over year. Domestic backlog soared 164% year over year to $338.8 million, while international backlog increased 81.5% to $97.3 million.

Operating Performance

Adjusted cost of sales went up 3.5% year over year to $211 million in the second quarter. Adjusted gross profit was $67 million, up 9% from the figure of $61.5 in the year-ago quarter. Adjusted gross margin expanded 90 basis points to 24.1% from the year-ago quarter.

Selling, general, administrative and engineering (SG&A) increased 29% year over year to around $55 million. Adjusted operating profit for the quarter under review was $14.1 million, which marked a decline of 25% from the prior-year quarter.

Adjusted operating margin was 5.1% compared with 7.1% in the prior-year quarter. The 200 basis point contraction stemmed from higher costs, and the company’s centralization and infrastructure efforts. This was somewhat offset by manufacturing efficiencies.

Adjusted EBITDA was $21.7 million in the reported quarter, down 14% from the year-ago quarter. Adjusted EBITDA margin was 7.8%, reflecting a 170 basis point contraction from the prior-year quarter.

Segment Performance

Revenues for the Infrastructure Solutions segment were down 1% to $180 million from the year-ago quarter. The segment’s adjusted gross profit was around $40 million, down 1.5% from the prior-year quarter.

Materials Solutions segment’s total revenues increased 17% year over year to $98 million. The segment’s adjusted gross profit was $27.4 million, reflecting a year-over-year increase of 29%.

Financial Position

Astec’s cash and cash equivalents improved to $174.5 million as of Jun 30, 2021 from $158.6 million as of Dec 31, 2020. As of the second quarter end, the company’s total debt was $0.4 million, flat compared with as of Dec 31, 2020.

So far, the company has been witnessing a ramp up in demand as evident from its record backlog. Steel prices have been trending higher so far this year, and are expected to remain so for the balance of the year. A tight labor market and supply chain headwinds remain concerns. These factors will impact the company’s margins this year.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -31.86% due to these changes.

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 B on the value side, putting it in the top 40% 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 indicates a downward shift. It's no surprise Astec Industries has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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