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Here's Why You Should Buy Applied Industrial (AIT) Stock Now

The U.S. GDP growth tapped the best gain in the past four years during the April-June quarter. Solid business and consumer spending, along with growth in exports, helped drive economic growth in the country.

Going forward, robust economic momentum will likely boost infrastructure spending in the United States. Against this backdrop, allocating your hard-earned money in selective industrial stocks will bring in higher returns.

Among the numerous potential gainers in the Industrial Products sector, adding Applied Industrial Technologies, Inc. AIT to your portfolio will bear fruit.

Revenue Prospects: Applied Industrial’s revenuesimproved 9.3% organically in fourth-quarter fiscal 2018 (ended June 2018). The company expects solid segmental performance and acquisition benefits to drive its top-line performances in the quarters ahead.

Applied Industrial currently anticipates to generate revenue growth of 16-18% in fiscal 2019. Notably, per the five-year 2023 objectives, the company intends to generate revenues of more than $4.5 billion, via mid-single-digit organic top-line growth.

Over the past three months, this Zacks Rank #2 (Buy) company has rallied 5.8%, outperforming 2% growth recorded by the industry.

 

Profitability: Applied Industrial pulled off an average positive earnings surprise of 11.78%, over the trailing four quarters. The company’s adjusted earnings in the fiscal fourth quarter surpassed the Zacks Consensus Estimate by 2% and came in 32.1% higher than the year-ago tally.  Profitability in the upcoming quarters is expected to rally on the back of disciplined cost management, solid productivity and lower corporate tax rates. The company estimates to report earnings of $4.48-$4.68 per share in fiscal 2019, higher than $3.74 per share reported in fiscal 2018.

Per our estimates, the company’s projected year-over-year earnings growth is currently pinned at 22.7% for fiscal 2019.

Acquisition Picture: Applied Industrial has been steadily strengthening its business on strategic acquisitions. For instance, the acquisition of Sentinel Fluid Controls (Mar 6, 2017) has been fortifying its Fluid Power business. Moreover, the FCX Performance buyout (January 2018) is also boosting the company’s Specialty Flow Control business. The company stated that FCX Performance will bolster its sales by $550 million, and earnings before interest, taxes, depreciation and amortization (EBITDA) by $68 million, within 12 months of the deal’s closure. Notably, this acquisition is anticipated to drive earnings for fiscal 2019.

Shareholders’ Payback: Applied Industrial intends to boost its shareholders’ value on the back of dividend payments and share-buyback programs. The company had raised its quarterly cash dividend rate by 3.4% in the fiscal second quarter (ended December 2017), in a bid to provide higher returns to its existing shareholders. In fiscal 2018, Applied Industrial repurchased 393,300 shares for $22.8 million and had authorization to buy back another 1,056,700 shares as of Jun 30, 2018.

Other Stocks to Consider

Some other top-ranked stocks in the same space are listed below:

Altra Industrial Motion Corp. AIMC sports a Zacks Rank #1 (Strong Buy). The company pulled off an average positive earnings surprise of 4.01% over the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Colfax Corporation CFX also flaunts a Zacks Rank of 1. The company came up with an average positive earnings surprise of 7.91% over the preceding four quarters.

DXP Enterprises, Inc. DXPE is also a Zacks #1 Ranked stock. The company generated an average positive earnings surprise of 101.32% during the same time frame.

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Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report
 
DXP Enterprises, Inc. (DXPE) : Free Stock Analysis Report
 
Altra Industrial Motion Corp. (AIMC) : Free Stock Analysis Report
 
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