Astec Industries (ASTE) Up 2.3% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Astec Industries (ASTE). Shares have added about 2.3% in that time frame, outperforming 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 catalysts.

Astec  Q3 Earnings & Revenues Beat Estimates, Up Y/Y

Astec reported third-quarter 2021 adjusted earnings per share of 50 cents, which beat the Zacks Consensus Estimate of 33 cents. The bottom line improved 163% from 19 cents reported in the prior-year quarter. The company benefited from pricing initiatives, higher sales and manufacturing efficiencies that helped offset inflation, supply chain disruptions and labor challenges.

Including one-time items, the company reported earnings per share of 41 cents in the quarter under review, compared with 7 cents in the year-ago quarter.

Revenues & Backlog

Astec’s revenues increased 15% year over year to $267 million in the quarter under review and also marked a third-quarter record. The top line surpassed the Zacks Consensus Estimate of $266 million. Domestic sales were up 11.4% year over year on pricing initiatives, stronger asphalt plant sales, and incremental concrete plant sales from acquired businesses and improved aftermarket parts sales. This was partially offset by lower sales from the exit of its oil and gas drilling product lines. International sales surged 30% in the third quarter, courtesy of increased activity in Canada, Australia, Brazil and Asia.

At the third quarter 2021-end, the company’s total backlog was a record $620.5 million, reflecting a significant improvement of 184% year over year. Domestic backlog soared 236% year over year to $508.6 million, while international backlog increased 66.5% to $111.9 million.

Operating Performance

Adjusted cost of sales climbed 14.5% year over year to $205 million in the third quarter. Adjusted gross profit was $62 million, up 18% from the year-ago quarter. Adjusted gross margin expanded 50 basis points to 23.3% from the year-ago quarter.

Selling, general, administrative and engineering (SG&A) increased 13% year over year to around $55 million. Adjusted operating profit for the quarter under review was $9.4 million, reflecting an improvement of 147% from the prior-year quarter.

Adjusted operating margin was 3.5% compared with 1.6% in the prior-year quarter. The 180 basis point expansion stemmed from higher sales and gross profit that helped offset higher costs related to centralization and infrastructure efforts associated with the company’s ongoing transformation initiatives.

Adjusted EBITDA was $16.8 million in the reported quarter, up 58% from the year-ago quarter. Adjusted EBITDA margin was 6.3%, reflecting a 170 basis point expansion from the prior-year quarter. The improvement was driven by pricing realization and improved sales volumes/mix, and manufacturing efficiencies, partially offset by cost inflation and increased SG&A expenses.

Segment Performance

Revenues for the Infrastructure Solutions segment were up 17% to $176 million from the year-ago quarter. The segment’s adjusted gross profit was around $40 million, up 25% from the prior-year quarter.

Materials Solutions segment’s total revenues were $91 million in the quarter under review, reflecting an increase of 13% year over year. The segment’s adjusted gross profit was $22.4 million, reflecting year-over-year increase of 9%.

Financial Position

Astec’s cash and cash equivalents improved to $164.6 million as of Sep 30, 2021 from $158.6 million as of Dec 31, 2020. As of the third quarter end, the company’s total debt was $0.2 million, compared with $0.4 million 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?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -45.37% due to these changes.

VGM Scores

Currently, Astec Industries has an average Growth Score of C, a grade with the same score on the momentum front. 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 B. 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 #4 (Sell). We expect a below average return from the stock in the next few months.

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