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

Posted: 2/21/2014 7:00:00 AM
Referenced Stocks: ASTE

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 as follows:

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.

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