Astec Industries was one of the biggest losers on Wall Street Tuesday after the Chattanooga-based paving and construction equipment maker reported lower-than-expected earnings for the first quarter.
Astec's stock dropped by more than 4.4 percent in an otherwise upbeat day of trading overall on the Nasdaq exchange Tuesday. Astec reported that first quarter net income was down 28 percent from a year ago to $9.5 million, or 41 cents per share. Analysts had expected Astec to earn 57 cents per share in the period.
Astec stock traded down $1.92 per share Tuesday to close at $41.51 per share. The drop shed nearly $44 million of market value from Astec Tuesday despite reassurances from company executives that margins continue to improve for Astec. The company was hurt by one-time expenses for an industry trade show in Las Vegas and the end of R&D tax credits, which combined cost the company 17 cents per share.
"Although total sales decreased slightly, we held our gross margin steady which is a testament to our focus on lean manufacturing and cost management," Astec CEO Ben Brock said. "Our focus on operations is resulting in better earnings for ongoing operations for the second quarter in a row."
Nonetheless, Brock said the company "is not satisfied" with the sales decline in the first quarter and expects shipments to improve this spring.
The company's backlog at the end of March was up 8.4 percent from a year ago to $299.6 million, primarily due to an 18 percent jump in the domestic backlog.
But slumping international sales due to the strong dollar and weak markets depressed overall sales for Astec in the first quarter from $247.8 million last year to $238.7 million this year. Todd Vencil, an equity analyst for Sterne, Agee & Leach, said sales were 7 percent below what he had projected for Astec.
"Astec put up another weak quarter as the international business continues to slide," Vencil said in a research report Tuesday.
Domestic sales increased 8 percent this winter but international sales slumped by 26 percent from a year ago.
Astec spent $4 million pitching its wares at the ConExpo in early March, but Brock said the event had "strong attendance in our booth" and Astec had good customer interactions.
Astec also expects its $36 million purchase of Telestack in Nothern Ireland completed on April 1 should boost earnings immediately this spring "and positively reinforce our backlog and outlook for the remainder of the year."
Astec said its paving customers are seeing improved business in the private sector, but government contracts remain uncertain due to continued congressional gridlock over a long-term transportation package.
"The reality continues to be that the uncertainty created in Washington D.C. is continuing to make our highway infrastructure customers feel uneasy about their futures," Brock said.
Contact Dave Flessner at email@example.com or at 757-6340.