Astec Industries, Inc.
(ASTE - Free Report
) has been disappointing investors of late. The shares of this leading manufacturer and marketer of road building equipment have yielded a negative return of 28.8% year to date. Is it time for investors to dump this stock from their portfolio? Let’s delve deeper and find out.
Estimates Moving South: Estimates for the company for fiscal 2017 and fiscal 2018 have moved south in the past 60 days, reflecting negative outlook of analysts. For fiscal 2017, the estimate has dropped 6% to $2.53 per share and for fiscal 2018 it has dipped 1% to $3.32.
Astec has significantly underperformed the industry
with respect to price performance in the past year.
The stock has declined 16.4% against the industry’s increase of 39.1%.
Surprise History: Astec has failed to meet the Zacks Consensus Estimate in the trailing four quarters. It has an unimpressive negative average earnings surprise of 11.92%.
Lackluster Q2, Guidance: Astec posted earnings of 62 cents per share in second-quarter 2017, down 22% year over year and also lagged the Zacks Consensus Estimate of 80 cents. The company’s total backlog dipped 5% to $352 million at the end of the second quarter from $371 million at second-quarter 2016 end.
For 2017, the company anticipates revenues to rise approximately 5% year over year, with flat to slightly improved net income for the year.
Near-term Headwinds Remain: Astec projects Highland pellets plant revenues to be in the range of $20-$25 million in 2017, due to lack of large orders. Further, the company does not expect any revenue contribution from the Georgia pellet plant in 2017. Moreover, the company's performance will be hurt by low oil prices, volatile steel price pressure, as well as economic and political environment in Brazil.
Unfavorable Zacks Rank, Score:
Astec currently carries a Zacks Rank #4 (Sell) and a VGM Score
of C. Here V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three scores (Value - B, Growth - A, Momentum - B). Such a score allows you to eliminate the negative aspects of stocks and select winners.
Likely Earnings Miss in the Next Quarter:
Astec is not expected to post an earnings beat in the next quarter. This is because the company does not have the right combination of two key ingredients — a positive Earnings ESP
(the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate) and a Zacks Rank #1, 2 or 3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter
. The company’s Zacks Rank #4, when combined with Earnings ESP of -19.86%, makes a beat unlikely in the third quarter.
As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Caterpillar has expected long-term earnings growth rate of 9.5%.
Terex has expected long-term earnings growth rate of 19.7%.
Komatsu has expected long-term earnings growth rate of 12.7%.
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