Astec Industries Inc. (ASTE) delivered an adjusted EPS of 26 cents in its fourth quarter ended December 31, 2010, reversing the year-ago loss of 2 cents. The company was safely ahead of the Zacks Consensus Estimate of 22 cents.
The prior-year quarter excluded a net loss from intangible asset impairment charges of 67 cents per share. Including this, Astec had reported a loss per share of 69 cents in the fourth quarter of fiscal 2009.
Revenues in the quarter were $190.8 million, a 7.3% jump from $177.9 million in the year-ago period and above the Zacks Consensus Estimate of $181 million. Domestic revenues rose 16% year over year to $119.6 million. International revenues, however, slipped 5% to $71.2 million.
As of December 31, 2010, Astec Industries’ backlog was $216.6 million, up from $135.1 million as of December 31, 2009. The international backlog increased 76% to $109.6 million from $62.2 million at the end of 2009 with the Asphalt segment accounting for 48.5% of the total international backlog increase. The domestic backlog went up 48% to $107.0 million compared with $72.9 million at the end of 2009. The Aggregate segment’s backlog accounted for 38.2% of the total domestic backlog increase.
Cost of sales remained flat at $146.5 million compared with the year-ago quarter. As a percentage of revenue, cost of sales decreased 570 basis points to 76.8%. Selling, general, administrative & engineering expenses increased 13% year over year to $36.3 million and, as a percentage of revenues, upped 100 basis points to 19%.
Gross profit surged 42% to $44.3 million in the quarter and gross margin expanded 570 basis points to 23.2%. Astec’s operating profit was $8 million in the quarter compared with an adjusted loss of $0.8 million in the year-ago quarter.
Segment Performance
The Aggregate and Mining Group delivered year-over-year revenue growth of 27% reaching $70.2 million. The segment reported an operating income of $4.3 million, reversing its year-ago loss (excluding impairment charges) of $0.2 million.
Revenues at the Asphalt Group dropped 26% to $45.5 million. Operating income also suffered a 30% decline to register $4.3 million with the segment margin coming in at 9.4% compared with 10% in the year-ago quarter.
The Mobile Asphalt Paving Group’s revenues increased 27% to $40.4 million. The segment’s operating income improved an impressive 140% to $5.6 million and segment margin soared 760 basis points to 16.2%.
The Underground segment’s revenues jumped 41% to $18.3 million. The segment’s loss of $1.08 million was an improvement over the loss of $4.7 million (excluding impairment charges) reported in the year-ago quarter.
Fiscal 2010 Performance
Astec Industries’ EPS for fiscal 2010 was $1.42, a 78% growth over 80 cents in the prior year and above the Zacks Consensus Estimate of $1.38. The prior year excluded a net loss from intangible asset impairment charges of 66 cents per share. Including the loss, Astec had reported an EPS of 14 cents in fiscal 2009.
Astec Industries’ fiscal 2010 revenues increased 4.5% year over year to $771.3 million, ahead of the Zacks Consensus Estimate of $759 million.
Financial Position
Astec Industries had cash and cash equivalents of $94.6 million as of December 31, 2010, up from $81.4 million as of September 30, 2010 and $40.4 million as of December 31, 2009. The company has a zero debt balance sheet.
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 most recent fourth quarter saw a pick up in domestic revenue 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.
Furthermore, we believe President Obama’s recent announcement of a $50 billion plan to rebuild the U.S. infrastructure bodes well for Astec. We currently have a Zacks #2 Rank (short-term Buy recommendation) on the 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. Astec Industries competes with Caterpillar Inc. (CAT), Ingersoll-Rand Plc (IR) and privately held CMI Terex Corporation.
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