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Astec (ASTE) Falls as Q3 Earnings, Revenues Miss Estimates

Shares of Astec Industries Inc.ASTE lost roughly 7.6% of their value since the company reported third-quarter 2015 results on Oct 20. Although the company's earnings increased 25% year over year to 10 cents per share, it missed the Zacks Consensus Estimate of 23 cents by a wide margin of 56%.

Astec Industries Inc. - Earnings Surprise | FindTheBest

New product offerings and lean manufacturing initiatives mainly drove the year-over-year increase, which was offset by low oil prices , the global mining slowdown, a strong U.S. dollar and lack of a long-term highway bill in the U.S.

Operational Update

The maker of equipment for building, paving and mining posted total revenues of $211 million, which decreased 4% from $220 million reported in the year-ago quarter. Revenues also fell short the Zacks Consensus Estimate of $228 million. Domestic sales increased 10% year over year to $156 million. However, international sales slumped 29% year over year to $55.1 million.

Cost of sales declined 4% year over year to $166 million. Gross profit came in at $45 million, increasing from $43 million in the year-ago quarter. Gross margin expanded 170 basis points (bps) year over year to 21.4%.

Selling, general, administrative and engineering expenses were $41 million in the reported quarter compared with $38.9 million in the year-ago quarter. Income from operations tumbled 6% year over year to $4.1 million. Operating margin remained flat year over year at 1.9%.

Segmental Performance

Revenues for the Infrastructure Group segment decreased 8.8% to $6 million from $85.6 million in the year-ago quarter. Segment profit increased significantly to $2.1 million in the reported quarter.

Total revenues for the Aggregate and Mining Group segment went down 8.7% year over year to $80.5 million. Profit plunged 44.3% to $3.8 million from $6.8 million in the prior-year quarter.

The Energy Group segment's total revenues decreased 15% to $45 million from $53 million in the year-ago quarter. Segment profit crashed to $1.9 million from $2.9 million in the year-ago quarter.

Financial Position

Astec reported cash and cash equivalents of $14 million at the end of third-quarter 2015, up from $13.8 million at the end of third-quarter 2014. Receivables decreased to $105 million as of Sep 30, 2015 from $108.8 million as of Sep 30, 2014. Inventories went up to $384.5 million as of Sep 30, 2015 from $370.4 million as of Sep 30, 2014. The company had no debt on its balance sheet.

Astec's total backlog decreased 17% to $245.6 million as of Sep 30, 2015 from $295 million as of Sep 30, 2014. Domestic backlog inched down 1% year over year to $187.5 million, as of Sep 30, 2015, whereas international backlog slumped 45% year over year to $58.1 million at the end of the quarter.

Our Take

Astec continues to invest significantly toward increasing its capacity, acquisitions and manufacturing new products while upgrading the existing ones. However, Astec is concerned about currency challenges and lower oil prices as well as lack of a long-term highway bill in the U.S. Weakening of the global mining sector also remains a headwind for the company.

Astec currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the sector include ACCO Brands Corporation ACCO , Berry Plastics Group, Inc. BERY and Global Brass and Copper Holdings, Inc. BRSS . All these stocks carry a Zacks Rank #1 (Strong Buy).

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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 Nasdaq, Inc.


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

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