Astec Industries shed nearly $250 million of market value Tuesday after the Chattanooga-based asphalt equipment maker reported weaker earnings in the first quarter due to unfavorable weather and greater pricing pressure.
Shares of Astec plunged 26 percent, or $11.10 per share, to close at $31.59 per share in trading on the Nasdaq exchange on Tuesday, nearly erasing all of the 30 percent gain the company had enjoyed so far in 2019.
Astec reported Tuesday that first quarter earnings dropped by 27.6% in the first three months of 2019 compared with a year ago to $14.3 million, or 63 cents per share, on relatively flat sales. That was 19 cents per share below the average analyst estimate for the quarter.
Adjusted for the impact of pellet plant activity in the first quarter of 2018, earnings per diluted share dropped 33 cents per share or 34.4%, the company reported.
Richard J. Dorris, interim chief executive officer of the Chattanooga-based company, said officials are disappointed that performance in the first quarter did not meet expectations.
“All three segments experienced pricing pressure from competitors in a tighter market and temporary weather related shutdowns at seven of our subsidiaries impacted our ability to build and ship equipment,” he said in the earnings announcement Tuesday.
The company also blamed unfavorable weather in March for much of the unexpected downturn and predicted the market should improve through the balance of the year.
“Unusually harsh weather has been a factor in the United States, and a lot of equipment that we manufacture is used in the field and can’t operate in excessively muddy conditions,” Steve Anderson, vice president of investor relations, told industry analysts.
But some analysts questioned whether the unexpected drop was due to poor weather.
“It seems to me like given the magnitude as to what’s happening here, we’re talking about more than just the weather,” said Mircea (Mig) Dobre, an industry analyst with Robert W. Baird..
David C. Silvious, vice president and chief financial officer, told analysts the market slowed down suddenly and decisively in March and he expects improvement through the balance of the year.
“We are hearing from the market from our customers that they have backlogs of work and that they are – they’re busy and they expect a decent 2019 in their own businesses,” he said.
Net sales for the first quarter of 2019 were $325.8 million compared to $325.5 million for the quarter in 2018. Domestic sales decreased 2.7% to $262.8 million for the first quarter of 2019 from $270.1 million a year ago. International sales increased 13.7% to $63 million for the first quarter of 2019 from $55.4 million a year ago, the company reported.
The company’s backlog at March 31 was $236.5 million, a decrease of $208.4 million, or 46.8%, compared to the March 31, 2018, backlog of $444.9 million.
“While we are paying close attention to the decrease in our backlog, we note that we experienced historical high points in our backlogs in the first quarter of 2018,” Dorris said. “We have already made a number of moves to adjust our capacity and, while we’ve seen some positive developments in recent order intake, we will continue to monitor the backlog and make adjustments where necessary.”
Astec projects that for all of 2019, revenues will be flat to up 3% compared to the 2018 adjusted revenues of a $1.246 billion with gross margins in the 23% to 24% range and operating margins in the 5% to 7% range. The company projects earnings per share for the full year of 2019 with $2.25 to $2.55.