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Astec (ASTE) Down 17.1% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Astec Industries, Inc. (ASTE - Free Report) . Shares have lost about 17.1% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted 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 Q2 Earnings & Revenues Miss Estimates, Lag Y/Y

Astec posted earnings of $0.62 per share in second-quarter 2017, down 22% year over year and also short of the Zacks Consensus Estimate of $0.80.

The maker of building, paving and mining equipment, posted total revenue of $302 million, rising 2.6% from the $294 million reported in the year-ago quarter. Revenues also missed the Zacks Consensus Estimate of $315 million.

Astec’s domestic sales dipped 2% year over year to $237 million. However, international sales increased 25% year over year to $65 million. Increase in sales in Russia, Europe and Canada were offset by decreases in South America and Africa.

Cost of sales was up 7% year over year to $236 million. Gross profit was at $65.5 million, an 11% decline from $73.4 million reported in the year-ago quarter. Gross margin contracted 330 basis points (bps) year over year to 21.7%. Gross margins were impacted by lower-than-expected margins due to the installation of pellet plant equipment as well as lower margins on several new products. New equipment traditionally carries a lower margin through the early part of its life cycle due to the refining and the manufacturing process.

Selling, general, administrative and engineering expenses went down 2% year over year to $44.2 million. Income from operations plunged 25% year over year to $21.3 million. Operating margin contracted 250 bps year over year to 7.1%.

Segment Performance

Revenues for the Infrastructure Group segment declined 6.1% to $143 million from $152 million in the year-ago quarter. Segment profit plunged 49.7% year over year to $9.9 million.

Total revenue for the Aggregate and Mining Group segment increased 8% year over year to $107 million. Profit improved 3.8% year over year to $11.4 million.

The Energy Group segment’s total revenue increased 20.7% to $51.7 million from $42.8 million in second-quarter 2016. The segment reported operating profit of $3.2 million, up from $2.6 million in the year-ago quarter.

Financial Position

Astec reported cash and cash equivalents of $52 million at the end of second-quarter 2017, down from $68 million as of Jun 30, 2016. Receivables increased to $149 million as of Jun 30, 201, from $127.5 million as of Jun 30, 2016. Inventories went up to $381 million as of Jun 30, 2017, from $379.5 million as of Jun 30, 2016.

Astec’s total backlog dipped 5% to $352 million at the end of the second quarter from $371 million at second-quarter 2016 end. Backlog improved in the Aggregate and Mining Group and Energy group a respective 55.2% and 9.5%. However, backlog in the Infrastructure Group declined 20.4%. Domestic backlog declined 13% year over year to $376 million as of Jun 30, 2017 while international backlog improved 39% year over year to $76.2 million at the end of the second quarter.

Outlook

For third-quarter 2017, the company expects revenues to be higher on a year-over-year basis, backed by backlog, domestic infrastructure product sales activity, continued oil, gas and water product sales activity, as well as momentum in international sales despite a strong U.S. dollar. The company expects gross and net margins to be also higher in the quarter from the prior-year quarter levels.

For 2017, the company anticipates revenues to rise approximately 5% year over year, with a flat to slightly improved net income for the year.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

Astec Industries, Inc. Price and Consensus

VGM Scores

At this time, Astec's stock has a subpar Growth Score of D, though it is lagging a bit on the momentum front with an F. The stock was allocated a grade of B on the value side, putting it in the second quintile 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.

The company's stock is suitable solely for value investors based on our styles scores.

Outlook

The Zacks Consensus Estimate for the current quarter moved down over the last 30 days. The stock has a Zacks Rank #4 (Sell). We expect below average returns from the stock in the next few months.




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