Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 29 Apr, 25 | ASTE | Buy | USD 36.36 | USD 38.07 | USD 40.0 | Same day | 10.0% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Astec Industries, Inc. designs, engineers, manufactures, and markets equipment and components used primarily in road building and related construction activities worldwide. The company operates in two segments, Infrastructure Solutions and Materials Solutions. The Infrastructure Solutions segment offers asphalt plants and related components, heaters, concrete dust control systems, asphalt pavers, vaporizers, concrete material handling systems, screeds, heat recovery units, paste back-fill plants, asphalt storage tanks, hot oil heaters, bagging plants, fuel storage tanks, industrial and asphalt burners and systems, custom batch plants, material transfer vehicles, soil stabilizing-reclaiming machinery, blower trucks and trailers, milling machines, soil remediation plants, wood chippers and grinders, pump trailers, concrete batch plants, control systems, liquid terminals, storage equipment and related parts, construction and retrofits, polymer plants, and concrete mixers, as well as engineering and environmental permitting services. This segment provides its products to asphalt producers; highway and heavy equipment contractors; utility contractors; sand and gravel producers; construction, demolition, recycle and crushing contractors; forestry and environmental recycling contractors; mine and quarry operators; port and inland terminal authorities; power stations; and domestic and foreign government agencies. The Materials Solutions segment designs and manufactures crushing equipment, mobile plants, bulk material handling solutions, vibrating equipment, screening equipment, electrical control centers, modular plants and systems, conveying equipment, plant automation products, portable plants, and mineral processing equipment, as well as offers consulting and engineering services. The company was incorporated in 1972 and is headquartered in Chattanooga, Tennessee.
Margin improvement: Adjusted operating margin expanded by 470 basis points to 8.6%, and adjusted EBITDA margin rose 460 basis points to 10.7%
Profitability growth : Adjusted net income rose 160.3% YoY to $20.3 million, while adjusted EBITDA increased 86.2% YoY to $35.2 million
Segment sales weakness in Material Solutions: Revenue dropped 12.7% YoY to $93.4 million, driven by financing constraints with contractors and dealers
Backlog contraction: Total backlog declined 28.1% YoY to $402.6 million, signaling potential future revenue softness
Astec faces a material risk of revenue volatility due to its reliance on cyclical end markets and recent sharp declines in backlog, particularly in its Materials Solutions segment
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 36.36 | 30.1 | 38.07 | 40.0 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Strong Financial Performance in First Quarter 2025
Astec Industries, Inc. reported a solid financial performance for the first quarter of 2025, with net sales rising 6.5% year-over-year to $329.4 million. The company achieved a notable increase in profitability, with net income attributable to controlling interest reaching $14.3 million, up from $3.4 million in the prior year period. On an adjusted basis, net income improved to $20.3 million, a 160.3% increase. Adjusted EBITDA rose 86.2% to $35.2 million, supported by strong operational execution and higher-margin product mix.
Improved Profitability and Margin Expansion
The company delivered significant gains in profitability and margins. Income from operations more than tripled to $20.5 million, while adjusted operating income more than doubled to $28.3 million. Astec’s adjusted operating margin expanded by 470 basis points to 8.6%, and adjusted EBITDA margin improved by 460 basis points to 10.7%. Diluted earnings per share increased to $0.62 from $0.15, with adjusted diluted EPS climbing to $0.88 from $0.34.
Segment-Level Performance Highlights
Within its Infrastructure Solutions segment, which includes road building and asphalt plant equipment, Astec posted strong net sales growth of 16.7%, reaching $236.0 million. Segment Operating Adjusted EBITDA grew 67.6% to $42.9 million, with a margin improvement of 550 basis points to 18.2%. However, the Materials Solutions segment experienced a 12.7% decline in net sales to $93.4 million, largely due to financing constraints impacting customer conversions. Despite the revenue drop, segment EBITDA margin slightly improved by 60 basis points to 5.6%.
Backlog Decline Indicates Potential Headwinds
A key area of concern was the sharp decline in backlog, which contracted by 28.1% year-over-year to $402.6 million. Both segments contributed to the reduction, with Infrastructure Solutions backlog down 25.8% and Materials Solutions backlog falling 32.5%. This decline may point to future revenue pressure if order intake does not accelerate in subsequent quarters, highlighting a risk to sustained top-line growth.
Liquidity, Cash Flow, and Capital Allocation
Astec maintained a solid liquidity position with $238.9 million in total available liquidity, including $90.1 million in cash and $148.8 million in available credit. The company generated $20.5 million in operating cash flow and $16.6 million in free cash flow during the quarter. Capital expenditures totaled $3.9 million, and Astec returned capital to shareholders through a $0.13 per share dividend.
Strategic Acquisition of TerraSource Holdings
Astec announced a definitive agreement to acquire TerraSource Holdings for $245 million, with the transaction expected to close in early Q3 2025. TerraSource, with over $150 million in annual revenue and approximately 60% derived from aftermarket parts, is expected to be immediately accretive to earnings and margins. The acquisition enhances Astec’s recurring revenue base, provides meaningful cost synergies estimated at $10 million annually by year two, and aligns with Astec’s growth strategy by expanding its footprint in adjacent materials processing markets.
Technical Observation (on the daily chart):
ASTE's stock price experienced a range breakout following decent earnings; however, it faced an immediate correction to address the inefficiency, suggesting the possibility of a near-term upside move. The 14-period RSI is currently above the midpoint, which supports a positive outlook. Additionally, the stock is trading above both its 21-day and 50-day Simple Moving Averages, further strengthening this favorable perspective. Overall, these elements contribute to a generally optimistic outlook.
As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Buy’ rating has been given to Astec Industries, Inc. (NASDAQ: ASTE) at its current market price of USD 36.26 as of April 29, 2025 (7:40 am PDT).
Data Powered by EOD Historical Data (“EODHD”).
Sector: Industrials Industry: Farm & Heavy Construction Machinery
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| ASTE Astec Industries Inc |
-0.68 1.64% | 40.86 | 30.60 | - | 0.72 | 1.48 | 0.74 | 12.73 |
| CAT Caterpillar Inc |
-3.72 1.06% | 345.77 | 18.01 | 18.38 | 2.86 | 9.94 | 3.43 | 14.02 |
| DE Deere & Company |
-6.97 1.32% | 519.36 | 11.46 | 13.68 | 1.77 | 4.98 | 2.72 | 9.37 |
| VLVLY Volvo AB ADR |
0.09 0.31% | 28.72 | 12.06 | 12.84 | 0.10 | 3.05 | 0.13 | 0.83 |
| VOLVF Volvo AB ser. B |
-0.0003 0.0011% | 28.56 | 11.95 | 12.67 | 0.10 | 3.01 | 0.13 | 0.84 |
Data Powered by EOD Historical Data (“EODHD”).
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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