Construction equipment company Astec (NASDAQ: ASTE) beat Wall Street’s revenue expectations in Q2 CY2026, with sales up 23.6% year on year to $408.1 million. Its non-GAAP profit of $0.94 per share was 9.2% below analysts’ consensus estimates.

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"We reported second quarter results with increased net sales, EBITDA and backlog. Materials Solutions orders continued to remain strong, while dealers reported healthy inventory levels and rental conversions." 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 performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Astec’s sales grew at a decent 8.5% compounded annual growth rate over the last five years. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Astec’s annualized revenue growth of 9.6% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

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 $601.1 million in the latest quarter and averaged 4.1% year-on-year growth over the last two years. Because this number is lower than its revenue growth, we can see the company fulfilled orders at a faster rate than it added new orders to the backlog. This implies Astec was operating efficiently but raises questions about the health of its sales pipeline.

This quarter, Astec reported robust year-on-year revenue growth of 23.6%, and its $408.1 million of revenue topped Wall Street estimates by 0.6%.

Looking ahead, sell-side analysts expect revenue to grow 6.9% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

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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 5.2% 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 4.2 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%, down 2.9 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

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Astec’s EPS grew at 12.6% compounded annual growth rate over the last five years, higher than its 8.5% 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 to better understand the drivers of its performance. As we mentioned earlier, Astec’s operating margin declined this quarter but expanded by 4.2 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 more recent period because it can provide insight into an emerging theme or development for the business.

For Astec, its two-year annual EPS growth of 27.9% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q2, Astec reported adjusted EPS of $0.94, up from $0.88 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Astec’s full-year EPS to grow 34.6% from $3.01 to $4.05.

Key Takeaways from Astec’s Q2 Results

It was good to see Astec narrowly top analysts’ revenue expectations this quarter. On the other hand, its EBITDA missed and its EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $52.38 immediately following the results.

Is Astec an attractive investment opportunity at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).