Reasons Why You Should Sell Astec (ASTE) Stock Right Now

Astec Industries, Inc. (NASDAQ:ASTE) has been disappointing investors, of late, given that shares of this road building equipment maker have recorded a decline of 23.3% year to date. Here’s what might drive the stock lower and why investors should sell the stock.

Estimates Moving South

The Zacks Consensus Estimates for 2017 and 2018 have moved down in the past 60 days, reflecting bearish analyst sentiments. For 2017, the same has plunged 35.9% to $1.61, while for 2018 it dropped 10.8% to $2.96.

Negative Earnings Surprise History

The company missed the Zacks Consensus Estimate in three out of the trailing four quarters. Further, it recorded an average negative earnings surprise of 7.19% over the last four quarters.

Price Performance

Astec has underperformed the industry with respect to price performance over the past year. The stock has lost 21.3%, while the industry recorded growth of 47.6%.

Unfavorable Zacks Rank and Score

Astec currently carries a Zacks Rank #5 (Strong Sell) and has a VGM score of D. Here V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three scores (Value - B, Growth - A, Momentum - B). Such a score allows you to eliminate the negative aspects of stocks and select winners.

Expensive Valuation

Astec's trailing 12-month price earnings (P/E) ratio is 30.8, while the industry's average trailing 12-month P/E ratio is lower at 25.9. This implies that the stock is overvalued.

Weak Q3

Astec posted a net loss of 12 cents per share in third-quarter 2017, against earnings of 30 cents recorded in the prior-year quarter. The reported loss came in line with the Zacks Consensus Estimate. The quarter bore the impact of additional investment to make significant design upgrades to its customers’ Georgia and Arkansas wood-pellet plants.

Astec’s domestic sales edged down 1.7% year over year in the recently-reported quarter. Its total backlog dipped 1% to $386 million at the end of the quarter from $389 million reported at the end of third-quarter 2016.

Gloomy Outlook

Astec projects fourth-quarter 2017 earnings to be slightly below the third-quarter earnings, considering the Thanksgiving and Christmas holiday schedules. The company remains cautious for the fourth quarter due to product mix and delay in delivery dates.

Near-Term Headwinds Linger

Astec's results are expected to be hurt by strong U.S. dollar, volatile steel prices, as well as the dismal economic and political environment in Brazil. Additionally, adverse weather conditions, mounting pricing pressure and competition might thwart its performance, going forward.

Key Picks

Some better-ranked stocks in the same sector are Caterpillar Inc. (NYSE:CAT) , H&E Equipment Services, Inc. (NASDAQ:HEES) and Komatsu Ltd. (OTC:KMTUY) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Caterpillar has an expected long-term earnings growth rate of 10.3%. Its shares are up 44.6% year to date.

H&E Equipment Services has an expected long-term earnings growth rate of 15.6%. Year to date, its shares have rallied 42.3%.

Komatsu has an expected long-term earnings growth rate of 16.2%. Its shares have gained 42.7% during the same time frame.

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