Astec (ASTE)

Construction equipment company Astec (NASDAQ:ASTE) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 20.1% year on year to $350.1 million. Its non-GAAP profit of $0.47 per share was 23.7% above analysts’ consensus estimates.

Company Overview

Inventing the first ever double-barrel hot-mix asphalt plant, Astec (NASDAQ:ASTE) provides machines and equipment for building roads, processing raw materials, and producing concrete.

Automation that increases efficiencies and connected equipment that collects analyzable data have been trending, creating new sales opportunities for construction machinery companies. On the other hand, construction machinery companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the commercial and residential construction that drives demand for these companies’ offerings.

Competitors offering similar products include Caterpillar (NYSE:CAT), Terex (NYSE:TEX), and Gencor (NASDAQ:GENC).

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Astec’s sales grew at a tepid 5.1% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Astec’s recent performance shows its demand has slowed as its revenue was flat over the last two years. We also note many other Construction Machinery businesses have faced declining sales because of cyclical headwinds. While Astec’s growth wasn’t the best, it did do better than its peers.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Astec’s backlog reached $449.5 million in the latest quarter and averaged 28.2% year-on-year declines over the last two years. Because this number is lower than its revenue growth, we can see the company hasn’t secured enough new orders to maintain its growth rate in the future.

This quarter, Astec reported robust year-on-year revenue growth of 20.1%, and its $350.1 million of revenue topped Wall Street estimates by 5.8%.

Looking ahead, sell-side analysts expect revenue to grow 6.7% over the next 12 months. Although this projection indicates its newer products and services will spur better top-line performance, it is still below the sector average.

For industrials businesses, cost of sales is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics in the short term and a company’s purchasing power and scale over the long term.

Astec has bad unit economics for an industrials company, giving it less room to reinvest and develop new offerings. As you can see below, it averaged a 23.9% gross margin over the last five years. That means Astec paid its suppliers a lot of money ($76.13 for every $100 in revenue) to run its business.

This quarter, Astec’s gross profit margin was 24.1%, up 1.1 percentage points year on year. Astec’s full-year margin has also been trending up over the past 12 months, increasing by 2.4 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Astec was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.9% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, Astec’s operating margin rose by 2.6 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Astec’s breakeven margin was down 3.1 percentage points year on year. Conversely, its revenue and gross margin actually rose, so we can assume it was less efficient because its operating expenses like marketing, R&D, and administrative overhead grew faster than its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Astec’s EPS grew at a remarkable 13.1% compounded annual growth rate over the last five years, higher than its 5.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Astec’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Astec’s operating margin declined this quarter but expanded by 2.6 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Astec, its two-year annual EPS growth of 27.6% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Astec reported adjusted EPS of $0.47, up from $0.31 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Astec’s full-year EPS of $3.42 to shrink by 11.8%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Astec’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 1.3%, meaning it lit $1.32 of cash on fire for every $100 in revenue.

Taking a step back, we can see that Astec’s margin dropped by 1.5 percentage points during that time. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. Almost any movement in the wrong direction is undesirable because it’s already burning cash. If the longer-term trend returns, it could signal it’s becoming a more capital-intensive business.

Astec burned through $12.3 million of cash in Q3, equivalent to a negative 3.5% margin. The company’s cash flow turned negative after being positive in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Astec historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8.5%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Astec’s ROIC averaged 4.8 percentage point increases each year. This is a good sign, and we hope the company can continue improving.

Astec reported $71.8 million of cash and $323.6 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $137.4 million of EBITDA over the last 12 months, we view Astec’s 1.8× net-debt-to-EBITDA ratio as safe. We also see its $10.3 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Astec blew past analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its EBITDA missed. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $46.41 immediately after reporting.

Updated: December 3, 2025 at 10:33 PM EST

When considering an investment in Astec, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Astec isn’t a terrible business, but it doesn’t pass our quality test. First off, its revenue growth was uninspiring over the last five years. And while its expanding operating margin shows the business has become more efficient, the downside is its projected EPS for the next year is lacking. On top of that, its cash burn raises the question of whether it can sustainably maintain growth.

Astec’s P/E ratio based on the next 12 months is 14.1x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $56.50 on the company (compared to the current share price of $46.10).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.