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Applied Industrial Technologies (AIT)
NYSE:AIT
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Applied Industrial Technologies
(NYSE:AIT)
74Outperform
Positive Factors
Acquisitions
The acquisition of Hydradyne is expected to contribute significantly to AIT's growth story, with projected sales and EBITDA expected to be accretive to earnings per share.
Earnings
Applied Industrial Technologies reported a strong performance with F2Q earnings per share exceeding both internal estimates and consensus expectations.
Negative Factors
Market Conditions
Motion's earnings and lowered guidance suggest limited macro upside in 3Q24 for short-cycle industrial companies.
Sales Performance
Organic daily sales showed a decline, indicating challenges in maintaining sales growth in certain sectors.
Applied Industrial Technologies (AIT) vs. S&P 500 (SPY)
Market Cap
$7.99B
Dividend Yield0.76%
Average Volume (3M)381.81K
Price to Earnings (P/E)21.1
Beta (1Y)1.12
Revenue Growth0.37%
EPS Growth3.52%
CountryUS
Employees6,916
SectorIndustrials
Sector Strength61
IndustryIndustrial - Distribution
Share Statistics
EPS (TTM)9.88
Shares Outstanding38,377,254
10 Day Avg. Volume388,956
30 Day Avg. Volume381,811
Financial Highlights & Ratios
PEG Ratio5.99
Price to Book (P/B)N/A
Price to Sales (P/S)1.92
Price to Cash Flow (P/CF)22.60
P/FCF Ratio22.50
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$275.00Price Target Upside18.55% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering5
Applied Industrial Technologies Business Overview & Revenue Model
Company DescriptionApplied Industrial Technologies, Inc. distributes industrial motion, power, control, and automation technology solutions in North America, Australia, New Zealand, and Singapore. It operates through two segments, Service Center Based Distribution, and Fluid Power & Flow Control. The company distributes bearings, power transmission products, engineered fluid power components and systems, specialty flow control solutions, advanced automation products, industrial rubber products, linear motion components, automation solutions, tools, safety products, oilfield supplies, and other industrial and maintenance supplies; and motors, belting, drives, couplings, pumps, hydraulic and pneumatic components, filtration supplies, valves, fittings, process instrumentation, actuators, and hoses, filtration supplies, as well as other related supplies for general operational needs of customers' machinery and equipment. It also operates fabricated rubber shops and service field crews that install, modify, and repair conveyor belts and rubber linings, as well as offer hose assemblies. In addition, the company provides equipment repair and technical support services. It distributes industrial products through a network of service centers. The company serves various industries, including agriculture and food processing, cement, chemicals and petrochemicals, fabricated metals, forest products, industrial machinery and equipment, life sciences, mining, oil and gas, primary metals, technology, transportation, and utilities, as well as government entities. The company was formerly known as Bearings, Inc. and changed its to name to Applied Industrial Technologies, Inc. in 1997. The company was founded in 1923 and is headquartered in Cleveland, Ohio.
How the Company Makes MoneyApplied Industrial Technologies generates revenue primarily through the sale of industrial parts and supplies. The company operates through two main segments: Service Center Based Distribution and Fluid Power & Flow Control. In the Service Center Based Distribution segment, AIT provides a wide variety of industrial products, including bearings, power transmission products, and other maintenance supplies, directly to industrial customers. The Fluid Power & Flow Control segment focuses on the sale and service of hydraulic and pneumatic components and systems. Additionally, AIT offers value-added services like engineering, design, and systems integration which enhance its product offerings and create additional revenue streams. The company also benefits from strategic partnerships with leading manufacturers and suppliers, which help expand its product portfolio and market reach.
Applied Industrial Technologies Financial Statement Overview
Summary
Applied Industrial Technologies exhibits strong financial health across income, balance sheet, and cash flow statements. The company benefits from growing revenues, improving profit margins, and sound debt management. While leverage remains a consideration, its operational efficiency and cash generation are commendable, positioning it well within the industrial equipment distribution industry.Income Statement
Applied Industrial Technologies demonstrates strong profitability with a consistent increase in gross profit and net profit margins. The revenue growth shows a positive trajectory, with a significant increase from 2022 to 2024. EBIT and EBITDA margins also indicate efficient operations, contributing to a robust income statement.88
Very Positive
Balance Sheet
The balance sheet reflects a solid equity base, with a favorable debt-to-equity ratio indicating manageable leverage. Return on Equity has been improving, showcasing efficient use of shareholder capital. The equity ratio is healthy, suggesting stability in asset financing. However, total liabilities are relatively high compared to assets.80
Positive
Cash Flow
The cash flow statement shows strong operating cash flows relative to net income, indicating good earnings quality. Free cash flow has grown substantially, supporting reinvestment and debt repayment. The company maintains positive free cash flow to net income ratios, underscoring effective cash management.85
Very Positive
| Breakdown | |||||
| TTM | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 | Jun 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 4.48B | 4.48B | 4.41B | 3.81B | 3.24B | 3.25B | Gross Profit |
| 1.32B | 1.34B | 1.29B | 1.11B | 935.52M | 937.74M | EBIT |
| 503.29M | 495.82M | 473.15M | 357.86M | 205.45M | 222.77M | EBITDA |
| 533.99M | 571.03M | 520.39M | 410.80M | 309.84M | 282.86M | Net Income Common Stockholders |
| 386.06M | 385.76M | 346.74M | 257.41M | 144.76M | 24.04M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 156.27M | 460.62M | 344.04M | 184.47M | 257.75M | 268.55M | Total Assets |
| 866.71M | 2.95B | 2.74B | 2.45B | 2.27B | 2.28B | Total Debt |
| 75.00M | 734.94M | 622.10M | 689.32M | 828.38M | 933.79M | Net Debt |
| -81.27M | 274.33M | 278.06M | 504.85M | 570.63M | 665.24M | Total Liabilities |
| 333.83M | 1.26B | 1.28B | 1.30B | 1.34B | 1.44B | Stockholders Equity |
| 532.88M | 1.69B | 1.46B | 1.15B | 932.55M | 843.54M |
| Cash Flow | Free Cash Flow | ||||
| 400.56M | 346.53M | 317.49M | 169.45M | 225.84M | 276.60M | Operating Cash Flow |
| 426.31M | 371.39M | 343.97M | 187.57M | 241.70M | 296.71M | Investing Cash Flow |
| -347.54M | -95.41M | -60.83M | -35.66M | -44.93M | -55.40M | Financing Cash Flow |
| -178.35M | -156.47M | -126.89M | -223.03M | -213.04M | -78.24M |
Applied Industrial Technologies Technical Analysis
Positive
231.97
Price Trends
240.54
Negative
249.70
Negative
230.91
Positive
Market Momentum
-4.14
Negative
45.30
Neutral
35.94
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AIT, the sentiment is Positive. The current price of 231.97 is above the 20-day moving average (MA) of 225.31, below the 50-day MA of 240.54, and above the 200-day MA of 230.91, indicating a neutral trend. The MACD of -4.14 indicates Negative momentum. The RSI at 45.30 is Neutral, neither overbought nor oversold. The STOCH value of 35.94 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AIT.
Applied Industrial Technologies Risk Analysis
Applied Industrial Technologies disclosed 19 risk factors in its most recent earnings report. Applied Industrial Technologies reported the most risks in the “Ability to Sell” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Applied Industrial Technologies Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $43.85B | 38.17 | 33.04% | 2.25% | 2.71% | -0.63% | |
76 Outperform | $1.15B | 16.98 | 17.54% | ― | 7.35% | 9.35% | |
74 Outperform | $7.99B | 21.08 | 22.70% | 0.76% | 0.37% | 3.52% | |
71 Outperform | $46.50B | 24.78 | 58.98% | 0.89% | 4.19% | 6.60% | |
70 Outperform | $6.69B | 10.51 | 14.34% | 1.23% | -2.53% | -4.03% | |
64 Neutral | $686.07M | 37.86 | -1.00% | 3.48% | -9.98% | -106.51% | |
62 Neutral | $7.67B | 13.25 | 3.04% | 3.47% | 3.63% | -13.99% |
* Industrials Sector Average
Performance Comparison
AIT
Applied Industrial Technologies
231.97
40.56
21.19%
DXPE
DXP Enterprises
81.45
26.54
48.33%
FAST
Fastenal Company
76.47
8.14
11.91%
GWW
WW Grainger
965.37
6.75
0.70%
WCC
Wesco International
153.86
-10.00
-6.10%
RYI
Ryerson Holdings
23.06
-9.33
-28.81%
Applied Industrial Technologies Earnings Call Summary
Earnings Call Date: Jan 29, 2025 | % Change Since: -7.87% | Next Earnings Date: Apr 24, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed outlook with significant achievements such as EBITDA and EPS growth, successful acquisition, and dividend increase. However, challenges in sales performance, particularly in December and January, and mixed end market demand tempered the overall positive sentiment.Highlights
EBITDA and EPS Growth
EBITDA and EPS exceeded expectations, increasing approximately 3% and 7% over the prior year, respectively, driven by strong gross margin performance and cost controls.
Engineered Solutions Segment Margin Expansion
EBITDA margins in the Engineered Solutions segment expanded by 115 basis points over the prior year, exceeding 16% for the first time.
Hydradyne Acquisition
The strategic acquisition of Hydradyne, with anticipated sales of $260 million and EBITDA of $30 million in the first year, strengthens Applied Industrial Technologies' fluid power position.
Dividend Increase
The company announced a 24% increase in its quarterly dividend, reflecting strong earnings and cash generation.
Lowlights
Sales Decline and Market Challenges
Average daily sales declined 3.4% over the prior year, with mixed end market demand and customers managing MRO spending conservatively.
Soft Organic Sales Growth in December
Softer sales during the last two weeks of December negatively impacted the quarter's overall organic sales growth by approximately 100 basis points.
January Sales Trends
January sales are currently trending down a mid-single-digit percent year-over-year on an organic basis, with ongoing macro policy and interest rate uncertainty as headwinds.
Company Guidance
During the Fiscal 2025 Second Quarter Earnings Call for Applied Industrial Technologies, the company provided guidance that projected sales growth of 1% to 3% for the full fiscal year, with an updated EPS range of $9.65 to $10.05. EBITDA margins were expected to be between 12.2% and 12.4%. The company reported that the second quarter EBITDA and EPS exceeded expectations, growing approximately 3% and 7% year-over-year, respectively. Gross margin expanded 114 basis points to 30.6%, driven by strong channel execution and ongoing margin initiatives. The company also highlighted the positive impact of its recent acquisition of Hydradyne, expected to contribute $260 million in sales and $30 million in EBITDA within the first year of ownership. Despite a mid-single-digit decline in January sales, Applied Industrial Technologies remained optimistic about the demand outlook, supported by improving order trends in its Engineered Solutions segment.Applied Industrial Technologies Corporate Events
M&A Transactions
Applied Industrial Technologies Completes Acquisition of Hydradyne
Positive
Jan 2, 2025
Applied Industrial Technologies announced the completion of its acquisition of Hydradyne, LLC, a provider of fluid power solutions, enhancing its distribution position in the U.S. The acquisition is expected to contribute significantly to Applied’s sales and EBITDA, with anticipated growth and operational momentum, and will be accretive to EPS within the first year.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.