Construction equipment company Astec (NASDAQ: ASTE) fell short of the market’s revenue expectations in Q3 2026, with sales flat year on year at $352.4 million. Its non-GAAP loss of $0.01 per share was significantly below analysts’ consensus estimates.

Is now the time to buy ASTE? Find out in our full research report (it’s free for active Edge members).

StockStory’s take

Astec’s third quarter performance was marked by a significant shortfall versus Wall Street’s expectations, with both revenue and adjusted earnings per share missing consensus estimates. Management attributed the underperformance primarily to prolonged softness in asphalt plant orders, which resulted in an unfavorable mix of shipments, as well as persistent input cost inflation outpacing pricing adjustments. CEO Jaco van der Merwe described the quarter as an “outlier,” noting that these challenges were more timing-related than structural, and emphasized the company’s efforts to manage through supply chain and pricing mismatches.

Looking ahead, Astec’s outlook is shaped by a substantial rebound in backlog, especially within the Infrastructure Solutions segment, and expectations for improved price-cost alignment in subsequent quarters. Management is focused on capitalizing on increased order activity, particularly in markets driven by federal infrastructure spending and large-scale data center projects. CFO Brian Harris highlighted that the company expects margins to recover as pricing actions catch up with cost inflation, stating, “By the end of the first quarter, we’ll be in a much better position.” The company also sees ongoing strength in parts and service sales as a stabilizing factor for future results.

Key insights from management’s remarks

Management attributed the quarter’s underperformance to a combination of delayed asphalt plant orders and a lag in pricing adjustments relative to inflation, while highlighting order recovery and backlog growth as positive signs.

• Delayed asphalt plant orders: The extended softness in asphalt plant demand led to a less favorable product mix and timing of shipments, impacting both revenue and operating margins. Management noted a significant portion of delayed orders shifted to later quarters, affecting near-term results.

• Input cost inflation outpaced pricing: Rising steel and material costs outstripped Astec’s ability to adjust prices, resulting in a roughly 200 basis point gap in price-cost alignment during the quarter. Management expects this mismatch to diminish as recent pricing actions take effect in upcoming quarters.

• Backlog surge in Infrastructure Solutions: The Infrastructure Solutions segment saw backlog rise by $93 million sequentially and $122 million year-over-year, reflecting renewed customer demand—particularly for asphalt and concrete plant equipment tied to federal and state infrastructure projects.

• Materials Solutions demand steady: While sequential orders in the Materials Solutions segment declined due to timing and dealer inventory normalization, underlying demand for aggregate processing equipment and aftermarket parts remains strong, bolstered by activity in data center and industrial construction.

• Working capital improvements: Despite weaker earnings, the company generated positive operating cash flow, driven by structural working capital efficiencies, tighter inventory management, and disciplined customer collections. Management expects further optimization as invoicing accelerates in the coming quarter.

Drivers of future performance

Astec’s management expects near-term performance to be driven by the pace of backlog conversion, margin recovery through pricing, and the trajectory of federal infrastructure spending.

• Backlog conversion key to growth: The sizable backlog in Infrastructure Solutions, with many projects scheduled for delivery in the next two quarters, is expected to drive revenue and support improved operational leverage as factories work through orders delayed from earlier in the year.

• Margin recovery through pricing actions: Management anticipates that recent and upcoming price adjustments will close the gap with elevated input costs, with the expectation that price-cost parity will be achieved by the end of the first quarter. However, most contracts have fixed pricing, so volatility in input costs remains a risk.

• Federal and state funding tailwinds: The company is closely monitoring the continuation and reauthorization of the federal highway bill, as well as robust state Department of Transportation budgets. Management believes stable multi-year funding and large-scale projects like data centers will underpin demand, though delays in public project approvals or changes in funding could impact visibility.

Catalysts in upcoming quarters

In the coming quarters, the StockStory team will be monitoring (1) the pace and profitability of backlog conversion, especially in Infrastructure Solutions, (2) the effectiveness of price increases in offsetting cost inflation and restoring margins, and (3) the stability of public infrastructure funding at federal and state levels. Continued aftermarket growth and order trends in data center construction will also be important signposts for Astec’s recovery and longer-term trajectory.

Astec currently trades at $35.34, down from $39.30 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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