Applied Industrial Technologies, Inc. AIT can be a good investment option, supported by its strong fundamentals and growth prospects. Also, upward revisions in its earnings estimates are reflective of the prevailing bullish sentiments for the stock.
The company is based in Cleveland, OH, and has a market capitalization of $2.3 billion. It belongs to the Zacks Manufacturing – General Industrial industry, which is part of the broader Zacks Industrial Products sector.
The company presently sports a Zacks Rank #1 (Strong Buy) and has a VGM Score of A.
Below we have discussed why it is worth investing in Applied Industrial.
Multiple Tailwinds: Though pandemic-led woes are concerning, Applied Industrial’s well-diversified business structure might prove beneficial in the quarters ahead. In addition to distribution of value-added industrial products, the company is engaged in providing multiple services. Also, it has exposure in the North America, New Zealand, Australia and Singapore.
Also, the company is committed toward building a healthy supply chain and drive operational excellence. Also, its cost-reduction measures in the present environment will help it deal with the pandemic-related financial stress.
Long-Term Opportunities: The company has solid growth potential in the long run. It expects to generate revenues in excess of $4.5 billion, with organic sales predicted to increase in mid-single digits. Acquired assets are predicted to boost sales by $100 million annually.
Also, earnings before interest, tax, depreciation and amortization margin are predicted to increase to 11% in the long run.
Shareholder-Friendly Policies: Over time, the company has been rewarding shareholders handsomely. It distributed dividends of $36.4 million in the first three quarters of fiscal 2020 (ended Mar 31, 2020). This payout reflects growth of 3.3% from the year-ago comparable period. It is worth mentioning here that the company’s board of directors approved a hike of 3.2% in the quarter dividend rate in January 2020.
It is worth noting here that the company’s dividend payouts have increased from $1.14 per share in fiscal 2017 (ended June 2017) to $1.22 in fiscal 2019 (ended June 2019).
Buyouts: The company believes in gaining market share, enhancing product lines and boosting growth opportunities through acquisitions. It acquired MilRoc Distribution and Woodward Steel in fiscal 2019 as well as bought Olympus Controls in the first quarter of fiscal 2020 (ended September 2019).
In third-quarter fiscal 2020 (ended Mar 31, 2020), acquired assets boosted the company’s sales by 1.9%. On a segmental basis, buyouts had a positive impact of 0.7% on Service Center-Based Distribution and 5% on Fluid Power & Flow Control.
Share Price Performance & Earnings Estimates Trend: Market sentiments have been positive for Applied Industrial for quite some time now. The company’s shares have gained 35.6% in the past three months against the industry’s 13.7% growth.
Also, the company’s earnings estimates have been revised upward in the past 60 days. Currently, the Zacks Consensus Estimate for its earnings is pegged at 73 cents per share for the fourth quarter of fiscal 2020 (ending June 2020), up 25.9% from the 60-day-ago figures. Notably, there have been two upward revisions in estimates during the period.
In addition, the consensus estimate for fiscal 2020 (ending June 2020) has been increased by 4.8% to $3.74 in the past 60 days, while that for fiscal 2021 (ending June 2021) has been raised by 18.1% to $3.53. Two upward revisions have been recorded for both the fiscal years in the past 60 days.
Applied Industrial Technologies, Inc. Price and Consensus
Applied Industrial Technologies, Inc. price-consensus-chart | Applied Industrial Technologies, Inc. Quote
Other Key Picks
Some other top-ranked stocks in the industry are Altra Industrial Motion Corp. AIMC, Broadwind Energy, Inc. BWEN and ParkerHannifin Corporation PH. While Altra Industrial currently sports a Zacks Rank #1, Broadwind Energy and ParkerHannifin carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for Altra Industrial and ParkerHannifin improved for the current year but remained unchanged for Broadwind Energy. Further, positive earnings surprise for the last reported quarter was 47.73% for Altra Industrial, 200% for Broadwind Energy and 29.2% for ParkerHannifin.
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