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Astec (ASTE) Q1 Earnings & Revenues Miss Estimates, Down Y/Y

Astec Industries, Inc.’s ASTE 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.

Astec Industries, Inc. Price, Consensus and EPS Surprise

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.

Share Price Performance

Astec’s shares have gained 66.1% in the past year, compared with the industry‘s rally of 120.6%.

Zacks Rank & Stocks to Consider

Astec currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are AGCO Corporation AGCO, Avery Dennison Corporation AVY and Caterpillar Inc. CAT. All of these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AGCO Corporation has an estimated earnings growth rate of 51.2% for the ongoing year. The company’s shares have rallied 208% in the past year.

Avery Dennison has an expected earnings growth rate of 19% for 2021. Over the past year, the stock has climbed 107%.

Caterpillar has an estimated earnings growth rate of 44.2% for the ongoing year. The company’s shares have soared 122% in the past year.

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