Astec Industries Inc. (ASTE) reported an EPS of 34 cents in third quarter versus 32 cents in the year-earlier quarter, falling short of the Zacks Consensus Estimate of 51 cents.
Total revenue increased 20.7% to $214.6 million from $177.8 million in the year-ago quarter, missing the Zacks Consensus Estimate of $227 million.
Domestic sales of the company amounted to $127.3 million in the quarter compared with $98.6 million in the year-earlier quarter. International sales increased to $87.3 million from $79.3 million in the year-ago quarter.
Costs and Margins
Cost of sales increased 24% to $168.2 million in the quarter from $135.9 million in the prior-year quarter. Gross profit increased 11% to $46.4 million from $41.9 million in the year-ago quarter. However, gross margins decreased 200 basis points year over year to 21.6% in the quarter.
Selling, general, administrative & engineering expenses rose to $37.4 million in the reported quarter from $31.8 million in the year-earlier quarter. Income from operations, however, decreased to $9 million from $10.1 million in the year-ago quarter. Consequently, operating margins contracted 150 basis points year over year to 4.2%.
Segment Performance
Total revenue in the Asphalt Group segment amounted to $50.4 million, up from $45.5 million in the year-ago quarter. Gross profit decreased to $8.5 million from $11.0 million in the prior-year quarter.
Net sales of Aggregate and Mining Group segment were $83.2 million in the quarter, up from $60.3 million in the previous years’ quarter. Gross profit also increased to $20.7 million in the quarter from $14.8 million in the prior-year quarter.
Mobile Asphalt Paving Group segment reported total revenue of $39.1 million versus $36.7 million in the year-ago quarter. Gross profit during the quarter dropped to $10.1 million from $10.4 million in the year-earlier quarter.
Underground Group reported net sales of $23.8 million versus $19.2 million in the year-over year quarter. Gross profit more than doubled to $4.08 million from $2.007 million in the previous years’ quarter.
All Others segment reported total revenue of $18 million, an 11% improvement from $16.2 million in the year-earlier quarter. However, gross profit declined to $3 million from $3.7 million in the year-ago quarter.
Financial Position
As of September 30, 2011, cash and cash equivalents amounted to $51.7 million, a decline from $73.5 million as of June 30, 2011. The company has a zero debt balance sheet.
Astec’s backlog increased to $221.6 million at the end of third quarter of 2011 from $145.6 million at the end of third quarter of 2010.
During the quarter, the company was active on the acquisition and development activities front. Astec completed a $3 million acquisition in Germany, added new facilities in Australia and Germany totaling approximately $7 million, signed a manufacturing joint venture agreement in Brazil which will result in an initial investment of $12 million and completed the GEFCO and STECO acquisition in early October for $30.8 million.
Astec was awarded a contract to supply asphalt plants to the U.S. Army that could amount to $89 million in sales over the next 5 years.
Our Take
A large number of Astec’s customers depend substantially on government funding for highway construction and maintenance, along with other infrastructure projects. With no progress on the reauthorization of the Highway Bill, the outlook for domestic sales looks bleak.
However, the company has witnessed a pick up in domestic revenue since the fourth quarter last year following a spate of declines. Any weakness in domestic sales is expected to be countered by robust international and parts sales and contribution from the company’s new and improved products.
The company currently has a Zacks #3 Rank (short-term Hold recommendation) on its stock.
Chattanooga, Tennessee-based Astec Industries is a leading manufacturer and marketer of road building equipment. The company sells equipment used in all phases of road building, from quarrying and crushing the aggregate to applying the asphalt. The company also sells equipment and components unrelated to road construction.
Astec Industries operates through four business segments — Aggregate and Mining Group, Asphalt Group, Mobile Asphalt Group and Underground Group. It competes with Caterpillar Inc. (CAT), Gencor Industries Inc. (GENC) and privately held CMI Terex Corporation.
