Astec Industries Inc. (ASTE) reported second-quarter 2014 earnings per share of 63 cents, which improved 31% from 48 cents in the year-earlier quarter. Earnings also beat the Zacks Consensus Estimate of 43 cents.
Operational Update
Total revenue increased 12% to $277.3 million from $248.1 million in the year-ago quarter. Domestic sales increased 14% year over year to $184.7 million. International sales were also up 8% year over year to $92.6 million.
Cost of sales rose 11.6% year over year to $215.1 million. Gross profit was $62.2 million, up 12% from $55.4 million in the year-ago quarter. Gross margin expanded 10 basis points (bps) year over year to 22.4%.
Selling, general, administrative and engineering expenses were $40.2 million in the reported quarter versus $37.8 million in the year-ago quarter. Income from operations grew 24.3% year over year to $21.9 million. Consequently, operating margin increased 80 bps year over year to 7.9%.
Segment Performance
Revenues in the Infrastructure Group segment rose 14.3% to $118.6 million from $103.8 million in the year-ago quarter. Segment profit improved significantly to $11.8 million from $6.1 million in the prior-year quarter.
Total revenue for the Aggregate and Mining Group segment went up 6.8% year over year to $106.7 million. Segment profit remained flat at $11.2 million compared with the prior-year quarter.
The Energy Group segment’s total revenue increased 16.8% to $52 million from $44.5 million in the year-ago quarter. Segment profit grew 31.8% year over year to $2.9 million.
Financial Position
Astec ended the quarter with cash and cash equivalents of $18.6 million, down from $41.2 million as of Jun 30, 2013. Astec has no debt on its balance sheet. The company’s total backlog increased 6.8% to $264.1 million as of Jun 30, 2014 from $247.3 million as of Jun 30, 2013. The domestic backlog increased 12% year over year to $157.4 million as of Jun 30, 2014, while international backlog remained flat at $106.7 million at the quarter end.
Our Take
Astec continues to invest significantly in increasing its capacity, manufacturing new products as well as upgrading its existing products. Acquisitions also remain a key growth strategy along with organic growth.
The company sees growth opportunities in the oil drilling in the Pellet plants, large crushers for mining; recycle asphalt plants and small commercial paving equipment. Astec is committed to improve parts sales volume in the long term.
Astec remains optimistic about the energy and mining business. Also, Astec will ship an oil rig and three pump trailers during the third quarter. This, along with continued strength in heaters for gas processing operations and increased sales of wood chippers and grinders ascertain positivity of the energy group.
Astec currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Caterpillar Inc. (CAT), H&E Equipment Services Inc. (HEES) and Komatsu Ltd. (KMTUY). While Caterpillar holds a Zacks Rank #1 (Strong Buy), H&E Equipment and Komatsu carry a Zacks Rank #2 (Buy).
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