Applied Industrial (AIT) Q2 Earnings Beat, Revenues Rise Y/Y
Applied Industrial Technologies AIT reported second-quarter fiscal 2024 (ended Dec 31, 2023) earnings of $2.24 per share, which surpassed the Zacks Consensus Estimate of $2.11. The bottom line jumped 9.3% year over year.
Net sales of $1,077.2 million outperformed the consensus estimate of $1,061 million. The top line inched up 1.6% year over year. Acquisitions boosted the top line by 1.4%, while foreign-currency translation had a positive impact of 0.3%. However, organic sales decreased 0.1% year over year.
Segmental Discussion
The Service Center-Based Distribution segment’s revenues, which contributed 67.7% to net revenues, totaled $729.3 million in the quarter under review. On a year-over-year basis, the segment’s revenues increased 3.4%. Our estimate for segmental revenues was $714.5 million. Organic sales grew 1.4%. Foreign currency translation increased sales by 0.4%, while acquisitions boosted sales by 1.6%. Segmental revenues were driven by benefits from sales process initiatives, solid growth across national accounts and strength in fluid power maintenance, repair, and operations in the United States.
The Engineered Solutions segment’s revenues (formerly Fluid Power & Flow Control segment), which contributed 32.3% to net revenues, totaled $347.9 million in the reported quarter. On a year-over-year basis, the segment’s revenues decreased 2%. Our estimate for the Engineered Solutions segment’s revenues in the fiscal second quarter was $346.4 million. Acquisitions boosted the top line by 1.0%. Organic sales decreased 3% due to reduced activity across the technology sector.
Applied Industrial Technologies, Inc. Price, Consensus and EPS Surprise
Applied Industrial Technologies, Inc. price-consensus-eps-surprise-chart | Applied Industrial Technologies, Inc. Quote
Margin Profile
In the reported quarter, Applied Industrial’s cost of sales increased 1.1% year over year to $760.1 million. Gross profit in the quarter increased 2.8% year over year to $317.1 million, while the gross margin increased to 29.4% from 29.1% in the year-ago quarter. Selling, distribution and administrative expenses (including depreciation) climbed 3.5% year over year to $202.5 million. EBITDA was $130.8 million, suggesting an increase of 4.2%.
Balance Sheet & Cash Flow
In the first six months of fiscal 2024, Applied Industrial had cash and cash equivalents of $412.9 million compared with $344 million at the end of fiscal 2023. Long-term debt was $571.9 million compared with $596.9 million at the end of fiscal 2023.
At the end of the reported quarter, AIT generated net cash of $168 million from operating activities, indicating an increase of 89.1% from the year-ago period. Capital expenditures totaled $9.9 million, down 23.1% year over year. Free cash flow in the fiscal first six months surged more than 100% year over year to $158.1 million.
In the first six months of fiscal 2024, AIT rewarded shareholders with dividends of $27.2 million, up 3.4% year over year.
Dividend Hike
Applied Industrial’s board approved a 5.7% hike in the quarterly dividend rate to 37 cents per share (annually: $1.48). The dividend will be paid to shareholders on Feb 29, of record as of Feb 15.
Fiscal 2024 Guidance
For fiscal 2024 (ending June 2024), Applied Industrial anticipates adjusted earnings of $9.35-$9.70 per share compared with $9.25-$9.80 expected earlier. The mid-point of the guided range — $9.53 — lies above the Zacks Consensus Estimate of $9.43.
The company predicts sales to increase 1-3% year over year compared with 1-4% anticipated earlier. It expects organic sales to inch up by 0-2%.
AIT expects an EBITDA margin of 12.1-12.3% for fiscal 2024. Previously, the same was expected in the range of 12.0-12.3%. The guidance includes the effects of a slowdown in end markets and ongoing inflationary and supply-chain headwinds.
Zacks Rank & Other Stocks to Consider
AIT currently carries Zacks Rank #2 (Buy). Some other top-ranked companies from the Industrial Products sector are discussed below:
Flowserve Corporation FLS presently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
FLS delivered a trailing four-quarter average earnings surprise of 27.3%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2023 earnings has remained steady. The stock has risen 22.3% in the past year.
A. O. Smith Corporation AOS presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 14%.
The Zacks Consensus Estimate for AOS’ 2023 earnings increased 0.5% in the past 60 days. Shares of A. O. Smith have jumped 34.6% in the past year.
Crane Company CR currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 29.8%.
In the past 60 days, the Zacks Consensus Estimate for Crane’s 2023 earnings has increased 0.2%. The stock has risen 43.9% in the past year.
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A. O. Smith Corporation (AOS) : Free Stock Analysis Report
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Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report
Crane Company (CR) : Free Stock Analysis Report
