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.

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"We were pleased to post another strong quarter evidencing our focus on delivering consistent profitability and growth," said Jaco van der Merwe, Chief Executive Officer.

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.

Revenue Growth

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 the best consistently grow over the long haul. Over the last five years, Astec grew its sales at a tepid 5.1% compounded annual growth rate. This fell short of our benchmark 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 better understand 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. While this projection indicates its newer products and services will catalyze better top-line performance, it is still below the sector average.

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Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

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.

In Q3, 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.

Earnings Per Share

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.

We can take a deeper look into Astec’s earnings quality to better understand the drivers 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%.

Key Takeaways from Astec’s Q3 Results

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.

Big picture, is Astec a buy here and now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.