Astec Industries, Inc. ASTE is making steady progress toward its strategy for profitable growth — Simplify, Focus and Grow. Savings from cost-reduction actions, restructuring and reorganization initiatives will aid earnings. Launch of new products, acquisitions, efforts to grow part sales volumes and international business will continue to drive the top line.
The leading manufacturer and marketer of road building equipment, which sells machinery utilized in each phase of road building from quarrying and crushing the aggregate to applying the asphalt, has a market capitalization of $1.1 billion. Shares of the company have gained 58.5% in the past year compared with the industry’s growth of 14.7%. The S&P 500 has rallied 12.3% during the same period.
Astec has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Why the Stock is Worth Buying
Solid Q2 Results: Astec’s second-quarter 2020 adjusted earnings per share of 67 cents beat the Zacks Consensus Estimate of 12 cents by a significant margin of 458%. The bottom line also improved 81% from the prior-year quarter. The better-than-expected results were driven by the company’s restructuring initiatives taken in 2019 and 2020, which offset the impact of lower revenues amid the coronavirus crisis.
Positive Earnings Surprise History: The company has a trailing four-quarter earnings surprise of 124.3%, on average.
Positive Growth Estimates: The Zacks Consensus Estimate for the company’s 2020 earnings per share is pegged at $1.76, suggesting growth of 13.6% from the prior-year quarter. The consensus mark for 2021 earnings stands at $2.62, indicating year-over-year improvement of 48.7%.
Estimate Revision Trend: Over the past 60 days, the Zacks Consensus Estimate for 2020 earnings and 2021 earnings have been revised upward by 50% and 48%, respectively.
Reasonable Valuation: Astec’s forward 12-month P/E ratio is 20.9, while the industry's forward 12-month P/E ratio is 22.4. Consequently, the stock is cheaper at this point based on the ratio.
Return on Assets (ROA): Astec currently has a ROA of 6.2%, while the industry's ROA is 5.7%. An above-average ROA denotes that the company is generating earnings by effectively managing assets.
Strong Leverage: Astec’s total debt is 0.1% of total capital, much lower than its industry's 73.6%. Its times interest earned ratio is at 9.5, higher than the industry’s 5.7. Thus, with a strong balance sheet and liquidity position, Astec seems well poised to tide over these turbulent times.
Earnings Growth Drivers Intact: The company remains focused on implementing initiatives to reduce expenses and conserve cash amid the coronavirus pandemic. These actions include hiring suspension (except for critical positions), reduction in workforce and cutting down discretionary spending. The company is making steady progress toward its strategy for profitable growth — Simplify, Focus and Grow.
Astec remains well poised for the long term backed by global population growth, increased urbanization and the need to repair the ageing infrastructure.
New Products, Acquisitions to Fuel Growth: Astec 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.
Astec also remains committed to introducing new products in the market and growing its part sales volume over the long term. Moreover, the company continues to focus on augmenting international sales through the establishment of newer regional international sales offices and fresh products for international customers.
Other Stocks to Consider
Some other top-ranked stocks in the Industrial Products sector include SiteOne Landscape Supply, Inc. SITE. Fortune Brands Home Security, Inc. FBHS and Cintas Corporation CTAS. All of these stocks sport a Zacks Rank #2.
SiteOne Landscape has an expected earnings growth rate of 18.5% for the current year. The stock has appreciated 62% in a year’s time.
Fortune Brands Home has a projected earnings growth rate of 6.2% for 2020. The company’s shares have gained 59% in a year.
Cintas has an estimated earnings growth rate of 1.4% for the ongoing year. The company’s shares have rallied 27% over the past year.
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Astec Industries, Inc. (ASTE): Free Stock Analysis Report
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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.