Astec Industries loses $6.6 million in the third quarter

Staff Photo by Olivia Ross / Astec tests a RX-405 asphalt cold planer prototype by doing standard resurfacing along Walnut and Seventh streets on July 25. The milling machine is used to grind the top layer of asphalt pavement before resurfacing. Astec Industries reported a $6.6 million loss in the third quarter on Wednesday.
Staff Photo by Olivia Ross / Astec tests a RX-405 asphalt cold planer prototype by doing standard resurfacing along Walnut and Seventh streets on July 25. The milling machine is used to grind the top layer of asphalt pavement before resurfacing. Astec Industries reported a $6.6 million loss in the third quarter on Wednesday.

Note: This story was updated Oct 3 to correct the adjusted earnings per share for Astec Industries to 27 cents per share

Shares of Astec Industries plunged Wednesday by more than 22% to their lowest price in more than 3 1/2 years after the Chattanooga-based asphalt equipment maker reported a third-quarter loss of $6.6 million, or 29 cents per share.

Most of the loss came from a $6.4 million contingency the company set aside after a jury verdict against Astec for a dispute over equipment sold by an Astec dealer in 2017. Without the non-recurring legal cost, Astec would have earned 27 cents per share as sales during the three months ended Sept. 30 fell by 3.8% from a year ago.

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The quarterly results missed Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for earnings of 64 cents per share. Revenues in the period, which came in at $303.1 million, were well short of the $329.5 million consensus estimate.

In response to the earnings report, Astec's stock fell by $8.89 per share to close at $31.15 per share in trading on the Nasdaq Exchange. Although the overall market gained in trading Wednesday, Astec shares dropped to their lowest level since early 2020.

In an earnings call with analysts, Astec CEO Jaco van der Merwe called the quarterly reports disappointing, but he said the company should do better in the fourth quarter. For the first three quarters of 2023, Astec earnings were still up dramatically from 2022, and sales were 8.3% above last year's total.

"Solid operating performance in the third quarter was masked by a $6.4 million litigation loss contingency in the Materials Solutions group," Merwe said in an earnings release Wednesday. "Combined with the outstanding performance in the first half of the year, year-to-date increases have been generated in net sales, operating margin and earnings per share over the same period in the prior year."

The loss for the contingency reserves follows a jury decision from a case involving an Astec dealer six years ago that could be costly for Astec. But Astec Vice President Steve Anderson said a judge has yet to issue a judgment in the case, and the judgment could still be appealed.

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In the company's earnings report Wednesday, van der Merwe acknowledged "there is much work to do" as the company continues to implement its strategy to simplify, focus and grow.

"However, our strong balance sheet, expanding parts and component sales and a multiyear federal highway spending bill for road construction provide stability as we drive the business forward," he said.

Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.

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