Applied Industrial (AIT) Up 41% in a Year: Will the Trend Last?
Shares of Applied Industrial Technologies AIT have rallied 40.8% in a year, significantly outperforming the industry’s 25.2% increase. The upside can be linked to the company’s focus on pricing and cross-selling actions, and growth initiatives, among other factors. Handsome rewards to shareholders are also expected to have driven the stock higher.
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What’s Aiding AIT?
Applied Industrial is gaining from strength across its Service Center Based Distribution and Engineered Solutions segments. The Service Center Based Distribution segment is benefiting from sales process initiatives and favorable pricing actions. Robust technical and engineering capabilities, and solid backlog levels, are aiding the Engineered Solutions segment. Focus on pricing and cross-selling actions and growth initiatives augur well for the company.
Applied Industrial’s focus on improving its product line, value-added services and initiatives to drive operational excellence and cost-saving efforts are fueling its growth. Investments to expand automation, the Industrial Internet of Things, digital offerings and customer development initiatives augur well for the company.
Applied Industrial’s efforts to reward its shareholders through dividends and share buybacks hold promise. In the first nine months of fiscal 2023, it paid out dividends worth $39.8 million, up 3.2% on a year-over-year basis. The company hiked its quarterly dividend rate by 2.9% in January 2023. In August 2022, the company’s board of directors authorized a new share buyback program to repurchase up to 1.5 million shares of its common stock.
Applied Industrial’s measures to expand operations through asset additions support its top-line growth. In April, the company acquired Advanced Motion Systems Inc., expanding its footprint in the upper Northeast region of the United States. The November 2022 acquisition of Automation, Inc. expanded AIT’s footprint across key verticals and geographies while supplementing its value-added services and cross-selling efforts. In third-quarter fiscal 2023, buyouts had a positive impact of nearly 1% on the company's total sales.
Will the Uptrend in Shares Continue?
Softness in the fluid power technology business due to ongoing inbound component delays has been a drag on Applied Industrial’s performance. With the economy reeling under the effects of higher interest rates and tight credit conditions, a slowdown in the broader market activity might weigh on AIT’s performance.
Despite adversities, Applied Industrial’s performance is expected to hold up well on strength across its core end markets and improving supply chains. The company’s upbeat guidance highlights the buoyancy surrounding its operations. For fiscal 2023, AIT expects total revenues to increase 14-15% year over year (13-15% increase expected earlier). The fiscal fourth-quarter sales are predicted to grow in the low to mid-single digits.
Zacks Rank & Other Stocks to Consider
Applied Industrial carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks within the broader Industrial Products sector are as follows:
Flowserve FLS currently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 2.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Flowserve has an estimated earnings growth rate of 64.5% for the current year. Shares of the company have gained 27% in a year.
Graco GGG currently flaunts a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 7.9%, on average.
Graco has an estimated earnings growth rate of 16.4% for the current year. Shares of the company have rallied 46.7% in a year.
Ingersoll Rand IR presently sports a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 12.6%, on average.
Ingersoll Rand has an estimated earnings growth rate of 14.8% for the current year. Shares of the company have jumped 46.4% in a year.
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Flowserve Corporation (FLS) : Free Stock Analysis Report
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