Astec Industries' earnings slumped 71% year over year to $0.08 per
share in the third-quarter 2014 due to pricing pressure, coupled
with product mix and lack of a federal highway bill. Earnings also
trailed the Zacks Consensus Estimate. However, the company remains
optimistic about fourth-quarter 2014 and fiscal 2015. Astec did not
provide any specific guidance for the next quarter. Though
acquisitions remain a growth driving strategy along with organic
growth and targeted sales growth, construction financing and rising
construction costs remain concerns for the company. Thus we are
reiterating our Underperform recommendation on Astec Industries
with a target price of $32.
Chattanooga, TN-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, which fall within three business segments that
include the Infrastructure Group, the Aggregate and Mining Group,
and the Energy Group.
Due to the recent sale of a subsidiary and other product lines
as well as responsibility for other product lines transferring
between subsidiaries, the composition of the Astec's reportable
segments has been changed as of Mar 31, 2014. The company now has
three reportable segments. A brief description of each segment is
The Infrastructure Group (43% of total revenue in second-quarter
2014) is made up of five business units. Three of which design,
engineer, manufacture and market portable, stationary and
relocatable hot-mix asphalt plants, asphalt pavers, material
transfer vehicles, milling machines and paver screeds. Two of the
business units sell, service and install products produced by the
manufacturing subsidiaries of the company.
The Aggregate and Mining Group (38%) is made up of seven
business units. These units manufacture equipment such as jaw
crushers, cone crushers, horizontal shaft impactors, vertical shaft
impactors and roll rock crushers, stationary rockbreaker systems,
vibrating feeders and high frequency vibrating screens, conveyors,
inclined, vertical and horizontal screens.
The Energy Group (19%) is made up of five business units. These
units design, engineer, manufacture and market a complete line of
drilling rigs for the oil and gas, geothermal and water well
industries, high pressure diesel pump trailers, a variety of
industrial heaters, heat transfer processing equipment, thermal
fluid storage tanks, waste heat recovery equipment, and whole-tree
pulpwood and biomass chippers and horizontal grinders.
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.
Astec Industries, Inc. (ASTE) (ASTE): Read the Full
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