Construction equipment company Astec (NASDAQ: ASTE) announced better-than-expected revenue in Q4 CY2025, with sales up 11.6% year on year to $400.6 million. Its non-GAAP profit of $1.06 per share was 27.7% above analysts’ consensus estimates.

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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

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Astec’s 6.6% annualized revenue growth over the last five years was mediocre. This was below our standard for the industrials sector and is a tough starting point 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 annualized revenue growth of 2.7% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. We also note many other Construction Machinery businesses have faced declining sales because of cyclical headwinds. While Astec grew slower than we’d like, 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 $514.1 million in the latest quarter and averaged 13.1% 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 year-on-year revenue growth of 11.6%, and its $400.6 million of revenue exceeded Wall Street’s estimates by 7.1%.

Looking ahead, sell-side analysts expect revenue to grow 3.6% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and suggests its newer products and services will not catalyze better top-line performance yet.

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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 5.1% 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 5.1 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Astec generated an operating margin profit margin of 5.7%, down 6.5 percentage points year on year. Since Astec’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

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 solid 10.4% compounded annual growth rate over the last five years, higher than its 6.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Astec’s earnings can give us a better understanding of its performance. As we mentioned earlier, Astec’s operating margin declined this quarter but expanded by 5.1 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 11.2% is similar to its five-year trend, implying strong and stable earnings power.

In Q4, Astec reported adjusted EPS of $1.06, down from $1.19 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Astec’s full-year EPS of $3.29 to stay about the same.

Key Takeaways from Astec’s Q4 Results

It was good to see Astec beat analysts’ EPS expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock traded up 1% to $59.09 immediately following the results.

Astec may have had a good quarter, but does that mean you should invest right 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).