Zacks Investment Research downgraded Applied Industrial Technologies, Inc. (AIT) to a Zacks Rank #5 (Strong Sell) on Dec 28, 2013.
Why the Downgrade?
In the last 60 days, the Zacks Consensus Estimate for Applied Industrial Technologies dropped 8.9% for 2013 and 8.1% for 2014. This followed the company’s disappointing financial results for the fiscal first quarter 2014 (ended Sep 30, 2013), reported on Oct 30, 2013. The estimate currently stands at $2.76 and $3.19 for 2013 and 2014, respectively.
Applied Industrial Technologies’ bottom-line performance fell short of expectations with earnings per share of 63 cents, 10% below the year-ago earnings and 11.3% less than the Zacks Consensus Estimate. Revenues also decreased 0.9% year over year primarily due to weak industrial demand. Volume was narrow in the quarter. Operating margin was 6.5% compared with 7.3% in the year-ago quarter.
Weak performance in the quarter led to downward revision of the guidance for fiscal 2014. Applied Industrial Technologies reduced its sales guidance to the band of $2.43–$2.49 billion from the $2.56–$2.61 billion range expected earlier. Earnings per share was predicted within a $2.65–$2.95 range versus $2.90–$3.15 expected earlier.
Considering the fiscal first quarter 2014 results and lowered outlook for fiscal 2014, we are cautious of Applied Industrial Technologies’ results in the quarters ahead.
Other Stocks to Consider
Applied Industrial Technologies is a $2.1 billion company, operating in the industrial equipment wholesale industry.
Some better-ranked stocks in the industry include Barnes Group Inc. (B), Xylem Inc. (XYL) and Middleby Corp. (MIDD). While Barnes Group and Xylem carry a Zacks Rank #1 (Strong Buy), Middleby holds a Zacks Rank #2 (Buy).