Despite increasing year-over-year net income in the second quarter by 33.8 percent, Astec Industries Inc. CEO J. Don Brock said he isn't optimistic about the company's domestic business for the second half of the year.
"Looking forward to the third quarter, volume continues to be our biggest challenge," he said. "We do not believe we will see much strength in the market going forward for the next 18 to 24 months before we see a recovery take place."
The company reported its second-quarter results Tuesday, with profit of $10.3 million - or 45 cents a share. Net income in the year-ago period was $7.7 million - or 34 cents per share.
The stock market reacted exuberantly. Shares on the Nasdaq soared 10.1 percent, or $2.69, to close at $29.30.
International sales made up 38.2 percent in the second quarter at $80 million, compared to $59.6 million in the year-ago period. Domestic sales remained flat at $129.2 million.
The company is building a presence in the mining industry while introducing new equipment for energy businesses.
"A lot of our success is going to depend on which direction Washington takes on the new energy bill and energy policy," he said.
Another federal influence on Astec will come in the form of the highway bill that Congress has yet to pass.
Mr. Brock said a highway bill that would give his customers a five- or six-year plan for federal highway spending would create optimism and loosen the purse strings of companies holding on to their cash.
"We see a lot of them sitting on the sidelines, waiting to see what the government's going to do," he said of domestic customers. "And they've got a lot of cash generally, just a reluctance to spend. ... While they're still spending on the small things, they're reluctant to pull the trigger on big expenditures until they get the highway bill."
Walt Liptak, a certified public accountant and analyst for Barrington Research in Chicago, said once the highway bill is in place customers will be more in tune with what will happen in the industry and be more willing to spend money on equipment. But he said he doesn't see hope for a consensus at least until elections are over this year, making 2011 the closest opportunity for a highway bill to be in place.
Still, Mr. Liptak said Astec is "really doing a good job to navigate through a pretty volatile environment" and has been able to capitalize on demand overseas, which he said will continue.
"They're in great financial shape," Mr. Liptak said. "They've got a very strong balance sheet, good cash flow. ... They've got a very strong market position."