Updated 4/13/25
Alamo Group Inc. (ALG) is a manufacturer of infrastructure and vegetation management equipment, supplying essential machinery for municipalities, agriculture, and industrial customers. With a strong cash-generating business model, disciplined capital allocation, and a conservative payout ratio, the company has carved out a reliable presence in its space. Shares have traded between $157 and $220 over the past year, recently settling near $171. While revenue and earnings dipped year-over-year, cash flow surged and margins remained healthy, supported by a well-managed balance sheet and operational focus. The leadership team, led by CEO Jeff Leonard—who is set to retire in 2025—continues to pursue strategic acquisitions and cost efficiencies. With a growing dividend, solid financial footing, and active M&A interest, Alamo Group presents a story of steady fundamentals with potential for long-term value.
Recent Events
This past year hasn’t exactly been smooth sailing. Revenue dropped by nearly 8% year over year, and earnings came down too—down around 11%. But zooming out a bit, it’s likely more of a correction than a crisis. Alamo, like many industrial companies, saw strong demand through the pandemic years. What we’re seeing now could be a natural step back from that heightened activity, not a sign of structural weakness.
Margins remain healthy, with net profit margins over 7% and operating margins just shy of 9%. Those are solid figures, especially given the recent revenue drop. Perhaps more impressive is the company’s ability to continue generating strong cash flows. Over the past year, it brought in just under $210 million in operating cash and nearly $195 million in levered free cash flow. That gives Alamo a lot of flexibility to keep investing in the business and still return value to shareholders.
The balance sheet is another area where Alamo stands tall. With a current ratio of 4.51 and a debt-to-equity ratio under 25%, it’s clear the company isn’t overextending itself. In a high-rate environment, that kind of financial footing is a real asset.
Key Dividend Metrics
📅 Ex-Dividend Date: April 16, 2025
💰 Next Dividend Payment: April 29, 2025
📈 Trailing Yield: 0.62%
🔮 Forward Yield: 0.70%
📊 5-Year Average Yield: 0.46%
💸 Payout Ratio: 10.8%
🚀 Dividend Growth (5-Year Avg): Steady, modest increases
🧱 Balance Sheet Support: Strong with low leverage and high liquidity
🔥 Free Cash Flow Coverage: Excellent
Dividend Overview
Alamo’s dividend might not stand out for its size, but it certainly stands out for its reliability. The company is currently paying $1.20 per share annually, which translates to a forward yield of about 0.70%. That’s not high, but when you consider it’s only paying out around 11% of its earnings, it paints a clear picture: Alamo has plenty of room to grow that payout over time.
With earnings per share sitting at $9.63 and a strong cash position, Alamo could double its dividend and still remain comfortably within safe payout territory. But management has made it clear over the years—they’d rather take a cautious approach, returning value steadily while keeping the company on solid ground.
Interestingly, the current yield is a bit above the company’s five-year average of 0.46%. That suggests there may be a short-term opportunity here for investors looking to lock in a slightly better yield than usual, especially given the pullback in share price over the past year.
Dividend Growth and Safety
When it comes to dividend growth, Alamo moves at a slow but steady pace. The increases aren’t massive, but they’ve been consistent. It’s not trying to dazzle anyone—it’s just quietly getting stronger each year. That’s the kind of behavior that long-term investors tend to appreciate, especially those who understand the value of compounding.
Safety is where Alamo really shines. A sub-11% payout ratio, strong free cash flow, and nearly $200 million in cash on hand all point to a dividend that’s not going anywhere anytime soon. Even if earnings stay soft or dip a little further, the company has more than enough breathing room to continue paying—and even growing—its dividend.
Free cash flow is a particularly important piece here. The company is generating nearly $195 million in free cash after accounting for capital expenses, and it’s using only a fraction of that to fund its dividend. That kind of coverage means there’s no dependency on earnings surprises or financial engineering. It’s real cash, consistently generated.
On the ownership side, there’s also strong support. Institutions hold nearly 97.5% of shares, and there’s been no significant dilution. That level of professional ownership often points to long-term conviction and stability. Insiders own a small percentage, but the share count has remained stable, which matters to dividend investors who care about per-share value.
While the dividend yield won’t be the headline story for ALG, the underlying quality of that dividend—backed by strong cash flow, conservative management, and a healthy balance sheet—makes it a solid piece of a dividend-focused portfolio. There’s nothing aggressive here, but there’s also very little to worry about. That’s a rare combination.
Cash Flow Statement
Alamo Group’s cash flow statement over the trailing twelve months highlights a company that’s firing on all operational cylinders. Operating cash flow surged to $209.8 million, a significant jump from $131.2 million the prior year. This growth reflects stronger internal efficiencies and margin stability, even as top-line revenue softened. Capital expenditures remained disciplined at $25.2 million, leading to a robust free cash flow figure of $184.6 million—roughly double the previous year’s mark.
On the financing side, management continues its careful approach. The company repaid more debt than it issued, trimming obligations by over $15 million net, and modestly repurchased shares without overstretching. Alamo finished the period with $197.3 million in cash, a huge improvement over just $51.9 million a year ago. Despite investing cash outflows of $22.2 million, mostly tied to maintenance and expansion, the balance sheet remains in excellent shape. This cash flow performance supports ongoing dividend payments and positions the company well for strategic flexibility.
Analyst Ratings
📉 Alamo Group Inc. (ALG) was recently downgraded by Baird, shifting their rating from “Outperform” to “Neutral.” Alongside the downgrade, they adjusted their price target from $224 down to $177. The move stemmed from concerns about near-term softness in revenue and the company’s guidance following its latest earnings. While the fundamentals remain intact, the downgrade reflected a more cautious stance in the short run, particularly amid a slower industrial equipment cycle.
📈 On the flip side, not all analysts are pulling back. DA Davidson maintained a “Buy” rating and reaffirmed their price target at $225, reflecting confidence in Alamo’s long-term positioning and strong balance sheet. Their outlook seems rooted in the belief that operational execution and consistent free cash flow will eventually outweigh current top-line pressures.
🎯 The current consensus price target among analysts sits at $203.50. That includes a low estimate of $177 and a high of $217, showing a decent spread but still leaning bullish overall. With shares trading around the $171 mark, there’s implied upside if Alamo can stabilize growth and continue its disciplined capital strategy. The differing analyst takes underscore a stock in transition—solidly managed, but facing mixed short-term expectations.
Earning Report Summary
Alamo Group wrapped up its latest quarter with a mix of solid wins and a few areas that left room for improvement. The company delivered earnings per share of $2.39, which came in slightly better than what analysts were expecting. On the flip side, revenue for the quarter landed at $385.3 million, missing the mark by a bit. It’s clear there’s still some unevenness in demand across different parts of the business, but management seems confident in how they’re navigating it.
Division Performance: A Tale of Two Segments
Alamo’s Industrial Equipment division was the standout this quarter. Sales climbed 11% to reach $225.5 million, helped by strong orders in snow and infrastructure-related equipment. That’s been a consistent area of strength, especially with public and private entities continuing to invest in essential maintenance.
Things weren’t quite as upbeat in the Vegetation Management segment. That side of the business saw sales drop over 25%, down to $159.8 million. Challenges in the forestry and ag markets weighed heavily, and demand just hasn’t bounced back yet. Leadership acknowledged the softness and is already moving forward with cost-saving efforts to counterbalance the dip.
Operating Metrics and Cash Flow
Despite the mixed top-line results, Alamo held up well operationally. Operating income for the quarter came in at $34.4 million, which was roughly 8.9% of total sales—a decent margin in this environment. They also made real progress in reducing debt. Compared to the end of 2023, the company cut its net debt by about $160 million, which speaks to how seriously they’re managing the balance sheet.
Cash flow was another bright spot. Operating cash flow increased to nearly $210 million for the trailing 12 months, up about 60% year-over-year. That surge was largely thanks to tighter control over inventories and improved receivables management. It’s the kind of disciplined approach that positions them well going into the rest of the year.
Looking Ahead
As for the road ahead, Alamo isn’t trying to oversell expectations, but they do see steady improvement coming—especially in the back half of 2025. They’re guiding for modest growth in the Vegetation segment and expect continued solid demand on the Industrial side. Cost reduction plans are already underway and are expected to save around $25 to $30 million annually.
One of the more interesting takeaways from management was their enthusiasm around acquisitions. CEO Jeff Leonard said they’re excited about the opportunity set in front of them, and that their current M&A pipeline is the most active it’s been in years. With a strong balance sheet and cash flow to support those moves, it wouldn’t be surprising to see Alamo make a few strategic plays in the coming quarters.
Chart Analysis
Alamo Group (ALG) has seen its share price take a round trip over the past year, with a noticeable downtrend early on followed by several failed recoveries and a more recent sharp dip.
Price Action and Moving Averages
The stock began the chart period near $210 and trended steadily downward through midyear, eventually bottoming out near $160 in July. From there, it attempted several rallies, but each one struggled to break meaningfully above the 200-day moving average. That long-term average, shown in blue, acted as consistent resistance, especially from October onward. The 50-day moving average, marked in red, crossed above the 200-day briefly at the start of the year—a bullish signal—but has since rolled over again, signaling renewed short-term weakness.
The recent slide back toward the $160s and the sharp rebound just afterward suggest some buyers are stepping in at support levels, but there’s still work to be done before the chart turns convincing to the upside. Price is currently below both major moving averages, keeping the technical pressure on.
Volume and Momentum
Volume has remained relatively steady, with no clear long-term accumulation showing. A few spikes in selling volume stand out, most notably during late March and early April. These were met with limited follow-through, which could indicate some capitulation and a potential bottoming process. Still, the lack of sustained buying volume means momentum is fragile.
The RSI (Relative Strength Index) dipped into oversold territory just before the recent bounce, dropping below 30. Historically, these dips have been followed by short-term relief rallies, as we’re seeing now. However, the RSI remains in the lower half of the range, suggesting there’s no strong upside momentum in place yet.
Final Thoughts on Trend
This chart tells the story of a stock that has lost its upward trend but hasn’t broken down entirely. It’s in a phase where sentiment is cautious, and any sustained rally will need to reclaim the 200-day average and stay above it for a while. The lower lows and lower highs pattern is still intact, and while the bounce from support is encouraging, the broader structure remains under pressure.
Until a stronger shift in trend takes shape, this setup looks like a recovery attempt still in progress rather than a completed bottom. Price action in the next few weeks—especially how it interacts with the 50-day moving average—will be key in determining if this rebound has legs or fades like the others before it.
Management Team
Alamo Group’s executive leadership is led by CEO Jeff Leonard, who stepped into the role in 2021. With a background in mechanical engineering and a long career in the industrial and manufacturing sectors, Leonard has focused on building a resilient, acquisition-driven growth strategy while keeping a close eye on operational efficiency. He has announced his plans to retire in mid-2025, and the company has already started the succession planning process to ensure continuity.
The leadership bench runs deep. Agnes Kamps is EVP, CFO, and Treasurer, and she’s been instrumental in maintaining Alamo’s strong balance sheet and disciplined capital management. The company’s two primary operating divisions are led by experienced hands—Rick Raborn oversees the Vegetation Management segment, and Kevin Thomas leads the Industrial Equipment group. On the strategic side, Ed Rizzuti manages corporate development and investor relations, helping steer M&A activity and communicate the broader company vision.
The team has proven capable of managing through volatile macro conditions, integrating acquisitions, and returning value to shareholders. Their measured approach has helped Alamo maintain profitability even during industry headwinds.
Valuation and Stock Performance
Alamo Group shares have had a choppy ride over the past year. The stock peaked around $220 and has since pulled back to the $170 range, putting it closer to the lower end of its 52-week range. Despite this drop, the fundamentals remain steady. With a trailing P/E ratio of 17.77, Alamo is priced at a level that looks modest compared to industrial peers, especially considering the company’s consistent cash flow and low payout ratio.
Analyst expectations reflect cautious optimism. The consensus price target is $203.50, suggesting upside potential from current levels. Valuation is being supported by strong returns—return on equity sits just under 12%, while return on assets is 7.2%. These numbers point to effective capital use and steady operational management.
Margins remain solid, with an operating margin close to 9% and a profit margin above 7%. The balance sheet adds another layer of confidence. With a debt-to-equity ratio under 25% and a current ratio of 4.51, Alamo isn’t overextended. It also holds over $197 million in cash, providing optionality for investments or strategic acquisitions down the road.
Free cash flow has nearly doubled year-over-year, now sitting at $184.6 million. That figure supports not just dividend payouts, but also self-funded growth initiatives—something that stands out in a market where many firms rely heavily on debt.
Risks and Considerations
There are, however, some headwinds that need to be considered. Revenue declined 7.7% year over year, and earnings followed a similar trend with a 10.9% drop. While part of this may be a normalization following a strong prior period, it does highlight pressure on the top line.
The Vegetation Management segment was a weak spot, with sales down more than 25%. Challenges in forestry and agriculture markets have clearly weighed on this division, and while management is taking steps to reduce costs, the timing of a turnaround remains uncertain.
Another factor to watch is the CEO transition. Leadership changes can bring both opportunity and disruption, depending on how the process is managed. Investors will want to see a clear, capable successor in place and continued execution on long-term strategy.
On a broader level, Alamo’s exposure to infrastructure, public works, and agriculture ties it closely to economic and policy trends. Budget shifts, changes in interest rates, or disruptions in municipal funding could influence demand for the company’s equipment.
Final Thoughts
Alamo Group continues to operate from a position of strength. The company isn’t reliant on flashy growth, but instead relies on careful execution, steady cash generation, and a management team that prioritizes balance and long-term value.
While the recent dip in earnings and revenue poses short-term questions, the underlying business remains healthy. There’s meaningful upside if the company can re-energize top-line growth while keeping its margins intact. With a strong balance sheet, ongoing cost initiatives, and an active acquisition pipeline, Alamo is positioning itself for a longer-term rebound.
Investors considering companies that pair operational consistency with strategic discipline will likely find Alamo’s profile appealing. Continued focus on execution, succession clarity, and sector stabilization will be the key pieces to watch moving forward.