Astec (ASTE) Shares Up 27% YTD: What's Driving the Rally?

Shares of Astec Industries, Inc. ASTE have been gaining on expected benefits from its Simplify, Focus and Grow initiative. Acquisitions and better-than-expected second-quarter results have also contributed to the price rally.

The company has a market cap of $1.2 billion. The company has a trailing four-quarter earnings surprise of 124.31%, on average.

The stock has gained 26.8% so far this year against the industry’s decline of 5.5%.

Let’s delve deeper and analyze the reasons behind the company’s impressive price performance and find out if there is room for further appreciation.

Upbeat Q2 Results

Astec’s second-quarter 2020 adjusted earnings per share improved 81% year over year to 67 cents and also beat the Zacks Consensus Estimate of 12 cents by a wide margin. The better-than-expected results were driven by the company’s restructuring initiatives taken in 2019 and 2020, which mitigated the impact of lower revenues amid the coronavirus crisis.

Solid Growth Projections

The Zacks Consensus Estimate for Astec’s current-year earnings per share is pegged at $1.76, indicating year-over-year growth of 13.6%. The same has moved north by 50% over the past 30 days. The Zacks Consensus Estimate for earnings per share in 2021 is $2.62, suggesting year-over-year growth of 48.7%. The estimate has moved up 48% over the past 30 days.

Driving Factors

The company is making steady progress with its strategy for profitable growth – Simplify, Focus and Grow. In the second quarter, Astec announced the closure of its Mequon, WI location, which will enable the company to leverage its footprint more efficiently. It also recently announced the acquisition of two premier full-line concrete batch plant manufacturers — CON-E-CO and BMH. Both the buyouts will significantly strengthen the Infrastructure Solutions group portfolio and provide customers with access to the most robust line of concrete products in the infrastructure industry. Astec is looking for avenues to grow regionally in attractive markets.

In the wake of the coronavirus pandemic, the company remains focused on implementing initiatives to reduce expenses and conserve cash. These actions include hiring suspension (except for critical positions), reduction in workforce and cutting down discretionary spending. Astec remains committed toward the improvement of its part sales volume over the long term. It also intends to improve competitive part sales and service sales. Moreover, the company continues to focus on growing international sales through the establishment of newer regional international sales offices and fresh products for international customers. Astec remains well poised for the long term backed by global population growth, increased urbanization and the need to repair the ageing infrastructure.

Zacks Rank & Other Stocks to Consider

Astec currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Some other top-ranked stocks in the Industrial Products sector include Silgan Holdings, Inc. SLGN, IIVI Incorporated IIVI and SiteOne Landscape Supply, Inc. SITE. While Silgan and IIVI sport a Zacks Rank #1, SiteOne carries a Zacks Rank of 2 (Buy), currently.

Silgan has a projected earnings growth rate of 28.7% for 2020. The company’s shares have gained 14.7% so far this year.

IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 37% year to date.

SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has appreciated 41% year to date.

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