Astec Industries, Inc. (ASTE - Free Report) has been disappointing investors, of late. Shares of this manufacturer and marketer of road building equipment have plunged around 41% year to date.
Estimates Moving South
The company’s earnings estimates for fourth-quarter 2018, full-year 2018 and 2019, moved south over the past 60 days, reflecting bearish analyst sentiment. For the fourth quarter, the estimate moved down 5% to 91 cents per share in the past 60 days.
For 2018, the estimate has dropped 14% to $2.78. For 2019, the estimate has declined 17% to $3.08 per share.
Negative Earnings Surprise History
The company missed the Zacks Consensus Estimate in the last reported quarter by 49.15%. Notably, Astec missed the Zacks Consensus Estimate in two of the preceding four quarters with an average negative surprise of 10.98%.
Falling Behind the Industry
Over the past year, Astec has underperformed its industry with respect to price performance. The stock has lost around 37%, while the industry has recorded a decline of around 13%.
Astec's trailing 12-month price earnings (P/E) ratio is 13.2, while the industry's average trailing 12-month P/E ratio is lower at 11.5. This implies that the stock is overvalued.
Near-Term Headwinds Remain
Astec’s gross margin in the third quarter was 22.7%, impacted mainly by negative change in the absorption variance and lower sales. Though the company maintains its target of attaining 25% gross margin in the current quarter, it will be a challenge, considering the product mix and competitive pressure. For the fourth quarter, Astec anticipates revenues to be in line with prior-year quarter. The company trimmed its core sales growth guidance to 1-3% for 2018 from the previous guidance of 7-12%.
The implementation of the new strategic sourcing initiative and improved inventory management will go on till July 2019. As a result of these initiatives, SG&A expenses will be higher during the period.
Astec utilizes steel as a major raw material to manufacture products. The company is facing input cost inflation, particularly of steel, due to the imposition of tariffs. Given the competition, it might not be possible for Astec to raise prices in order to combat the raw material cost inflation.
Unfavorable Zacks Rank
Astec currently carries a Zacks Rank #5 (Strong Sell).
Stocks to Consider
Better-ranked stocks in the same industry include Enersys (ENS - Free Report) , CECO Environmental Corp. (CECE - Free Report) and Rexnord Corporation (RXN - Free Report) . While Enersys flaunts a Zacks Rank #1 (Strong Buy), CECO and Rexnord carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enersys has a long-term earnings growth rate of 10%. Its shares have rallied 22%, over the past year.
CECO has a long-term earnings growth rate of 15%. The company’s shares have surged 45%, in the past year.
Rexnord has a long-term earnings growth rate of 16.4%. The stock has gained 14% in a year’s time.
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