Shares of Astec Industries fell by more than 7.8 percent Tuesday to the lowest level in more than a year after the Chattanooga-based asphalt equipment maker reported a bigger-than-expected drop in earnings in the second quarter.
Astec boosted its sales by 3 percent over a year ago during the spring quarter, but net income dropped by 22 percent from a year ago and fell below analysts' expectations.
Astec earned $14.4 million, or 62 cents per share, on sales of $301.9 million in the second quarter of 2017. A year ago in the same period, Astec earned $18.2 million, or 79 cents per share, on sales of $294.4 million.
The income results were 18 cents per share below the average consensus of analysts who follow the company, and revenues were also $12 million less than forecast.
Ben BrockIn response, Astec's stock fell by $4.33 per share to close at $50.92 per share, its lowest price since May 2016.
"Although we were not pleased with our net income for the quarter, we were pleased that we were able to grow sales while also shipping several new products during the quarter," Astec CEO Ben Brock said in the quarterly earnings statement.
Brock said the cost overruns on the projected completion costs for one of its pellet plants was "embarrassing" but he said the company expects to do better in the balance of the year and continue to grow, both organically and through more acquisitions.
Earnings were hit by unexpected costs from one of Astec's construction subcontractors and other expenses for one of its pellet plants.
"It's a big mistake, but it's a mistake made and it's one that's behind us," Brock said. "And we know how we would handle that going forward. But it is behind us. It's not something that shows back up again."
Astec should benefit by a growing backlog for its products compared with a year ago, including a 27 percent higher backlog for its pellet plants.
"Given our current backlog and quote activity, we are optimistic on our outlook for the balance of 2017," Brock said. "Given these encouraging signs, we believe that our third quarter 2017 revenue will be ahead of our third quarter 2016 revenue."
"We have the opportunity to grow and operationally improve our company for the fourth year in a row in 2017," Brock added. "Acquisitions remain a part of our growth strategy along with organic growth. And to that end, we do continue to work on potential additions to the Astec family."
Astec Industries shares have declined 18 percent since the beginning of the year. But the stock has risen roughly 3 percent in the last 12 months.
Contact Dave Flessner at dflessner@timesfreepress.com.