Astec Industries, Inc. (ASTE): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
We maintain our Neutral recommendation on Astec Industries with a target price of $44.00. Astec's first-quarter 2013 earnings declined 28% year over year to $0.41 per share. The reported figure fell short of the Zacks Consensus Estimate of $0.57. Total revenue decreased 4% to $238.7 million, way short of the Zacks Consensus Estimate. Astec continues to witness decline in international sales due to strong U.S dollar and weakness in certain markets like Canada and Australia. However, Astec will benefit from new product offerings, capacity expansion, new products, growth in the wood pellet business and Telestack acquisition.

Overview:

Chattanooga, Tenn.-based Astec Industries Inc. (ASTE) is a leading manufacturer and marketer of road building equipment. The company sells equipment used in each phase of road building, from quarrying and crushing the aggregate to applying the asphalt. Also, the company sells equipment and components unrelated to road construction, such as trenching, auger boring, directional drilling, industrial heat transfer equipment, whole-tree pulpwood chippers, horizontal grinders and blower trucks. In addition to equipment sales, Astec manufactures and sells replacement parts for equipment in each of its product lines and replacement parts for some of its competitors' equipment. Astec has 15 manufacturing subsidiaries, 14 of which fall under the four reportable segments listed below:

The Aggregate and Mining Group (37% of total revenue in third-quarter 2013) is made up of six business units called Telesmith, Kolberg-Pioneer, Astec Mobile Screens, Johnson Crushers International, Breaker Technology and Osborn Engineered Products. These units manufacture equipment such as jaw, cone, or impact crushers for aggregate, metallic mining and recycling markets.

The Asphalt Group (22%) is made up of four business units called Astec Inc., Dillman Equipment Heatec Inc., and CEI Enterprises Inc. These units manufacture a complete line of asphalt plants, heat transfer processing equipment and storage tanks for asphalt paving and other non-related industries.

The Mobile Asphalt Group (17%) is made up of two business units called Roadtec and Carlson Paving Products. These units manufacture asphalt pavers, material transfer vehicles, milling machines, stabilizers and screeds. Also, the Carlson unit manufactures Windrow pickup machines that transfer hot mix asphalt from the road bed into the paver's hopper.

The Underground Group (13%) is made up of three business units Astec Underground, American Augers and GEFCO, Inc. These units manufacture a complete line of underground construction equipment and accessories. Astec Underground produces heavy-duty Trencor trenchers, utility trenchers, vibratory plows and compact horizontal directional drills. American Augers manufactures large horizontal, directional drills and auger boring machines and down-hole tooling to support these units for the underground construction market.

The company also has an 'Other category , which includes the business units that do not meet the requirements of separate disclosures as an operating segment. The business units in the Other category consist of Peterson Pacific Corp. and Astec Australia Pty Ltd. Peterson, acquired in Jul 2007, designs, manufactures and markets whole-tree pulpwood chippers, horizontal grinders and blower trucks. Astec Australia was formed to acquire certain assets of Q-Pave Pty Ltd ("Q-Pave") in Oct 2008. Astec Australia sells, installs, services and provides parts support for certain products produced by the company's Asphalt, Mobile Asphalt Paving and Underground groups. Revenues for this category comprised the remaining 11% in third-quarter 2013.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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