Applied Industrial Technologies (AIT) AI Stock Analysis

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Applied Industrial Technologies

(NYSE:AIT)

74Outperform

Applied Industrial Technologies' stock score reflects robust financial performance, with strong income growth and efficient cash management. Despite these strengths, technical indicators show bearish trends, and valuation metrics suggest moderate appeal. The recent earnings call highlighted both positive achievements and challenges, including sales declines and market uncertainties. Overall, the company's strengths in financial health and strategic acquisitions are offset by mixed market conditions and technical weaknesses.

Positive Factors

Acquisitions

The acquisition of Hydradyne is expected to contribute significantly to AIT's growth story, with projected sales and EBITDA expected to be accretive to earnings per share.

Earnings

Applied Industrial Technologies reported a strong performance with F2Q earnings per share exceeding both internal estimates and consensus expectations.

Negative Factors

Market Conditions

Motion's earnings and lowered guidance suggest limited macro upside in 3Q24 for short-cycle industrial companies.

Sales Performance

Organic daily sales showed a decline, indicating challenges in maintaining sales growth in certain sectors.

Applied Industrial Technologies (AIT) vs. S&P 500 (SPY)

Market Cap

$8.90B

Dividend Yield0.68%

Average Volume (3M)401.25K

Price to Earnings (P/E)23.5

Beta (1Y)1.11

Revenue Growth0.37%

EPS Growth3.52%

CountryUS

Employees6,916

SectorIndustrials

Sector Strength70

IndustryIndustrial - Distribution

Share Statistics

EPS (TTM)9.88

Shares Outstanding38,377,254

10 Day Avg. Volume439,371

30 Day Avg. Volume401,255

Financial Highlights & Ratios

PEG Ratio6.68

Price to Book (P/B)N/A

Price to Sales (P/S)1.92

Price to Cash Flow (P/CF)22.60

P/FCF Ratio22.50

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$275.00

Price Target Upside21.79% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering5

Applied Industrial Technologies Business Overview & Revenue Model

Company DescriptionApplied Industrial Technologies (AIT) is a leading distributor and solutions provider in the industrial sector, specializing in the distribution of bearings, power transmission components, fluid power products, and other industrial supplies. The company serves a diverse range of industries including manufacturing, energy, automotive, and aerospace, offering both products and comprehensive services such as inventory management and technical support.

How the Company Makes MoneyApplied Industrial Technologies generates revenue primarily through the sale of industrial parts and supplies. The company operates through two main segments: Service Center Based Distribution and Fluid Power & Flow Control. In the Service Center Based Distribution segment, AIT provides a wide variety of industrial products, including bearings, power transmission products, and other maintenance supplies, directly to industrial customers. The Fluid Power & Flow Control segment focuses on the sale and service of hydraulic and pneumatic components and systems. Additionally, AIT offers value-added services like engineering, design, and systems integration which enhance its product offerings and create additional revenue streams. The company also benefits from strategic partnerships with leading manufacturers and suppliers, which help expand its product portfolio and market reach.

Applied Industrial Technologies Financial Statement Overview

Summary

Applied Industrial Technologies exhibits strong financial health across income, balance sheet, and cash flow statements. The company benefits from growing revenues, improving profit margins, and sound debt management. While leverage remains a consideration, its operational efficiency and cash generation are commendable, positioning it well within the industrial equipment distribution industry.

Income Statement

Very Positive

Applied Industrial Technologies demonstrates strong profitability with a consistent increase in gross profit and net profit margins. The revenue growth shows a positive trajectory, with a significant increase from 2022 to 2024. EBIT and EBITDA margins also indicate efficient operations, contributing to a robust income statement.

Balance Sheet

Positive

The balance sheet reflects a solid equity base, with a favorable debt-to-equity ratio indicating manageable leverage. Return on Equity has been improving, showcasing efficient use of shareholder capital. The equity ratio is healthy, suggesting stability in asset financing. However, total liabilities are relatively high compared to assets.

Cash Flow

Very Positive

The cash flow statement shows strong operating cash flows relative to net income, indicating good earnings quality. Free cash flow has grown substantially, supporting reinvestment and debt repayment. The company maintains positive free cash flow to net income ratios, underscoring effective cash management.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
4.48B	4.48B	4.41B	3.81B	3.24B	3.25B
	Gross Profit
1.32B	1.34B	1.29B	1.11B	935.52M	937.74M
	EBIT
503.29M	495.82M	473.15M	357.86M	205.45M	222.77M
	EBITDA
533.99M	571.03M	520.39M	410.80M	309.84M	282.86M
	Net Income Common Stockholders
386.06M	385.76M	346.74M	257.41M	144.76M	24.04M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
156.27M	460.62M	344.04M	184.47M	257.75M	268.55M
	Total Assets
866.71M	2.95B	2.74B	2.45B	2.27B	2.28B
	Total Debt
75.00M	734.94M	622.10M	689.32M	828.38M	933.79M
	Net Debt
-81.27M	274.33M	278.06M	504.85M	570.63M	665.24M
	Total Liabilities
333.83M	1.26B	1.28B	1.30B	1.34B	1.44B
	Stockholders Equity
532.88M	1.69B	1.46B	1.15B	932.55M	843.54M
Cash Flow		Free Cash Flow
400.56M	346.53M	317.49M	169.45M	225.84M	276.60M
	Operating Cash Flow
426.31M	371.39M	343.97M	187.57M	241.70M	296.71M
	Investing Cash Flow
-347.54M	-95.41M	-60.83M	-35.66M	-44.93M	-55.40M
	Financing Cash Flow
-178.35M	-156.47M	-126.89M	-223.03M	-213.04M	-78.24M

Applied Industrial Technologies Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price225.79

Price Trends

50DMA

239.12

Negative

100DMA

248.76

Negative

200DMA

231.24

Negative

Market Momentum

MACD

-4.14

Negative

RSI

45.30

Neutral

STOCH

35.94

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AIT, the sentiment is Neutral. The current price of 225.79 is above the 20-day moving average (MA) of 225.45, below the 50-day MA of 239.12, and below the 200-day MA of 231.24, indicating a neutral trend. The MACD of -4.14 indicates Negative momentum. The RSI at 45.30 is Neutral, neither overbought nor oversold. The STOCH value of 35.94 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for AIT.

Applied Industrial Technologies Risk Analysis

Applied Industrial Technologies disclosed 19 risk factors in its most recent earnings report. Applied Industrial Technologies reported the most risks in the “Ability to Sell” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Applied Industrial Technologies Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FAST	77 Outperform	$43.85B	38.17	32.35%	2.11%	2.71%	-0.63%
DXPE	76 Outperform	$1.28B	18.47	17.54%	―	7.35%	9.35%
AIT	74 Outperform	$8.90B	23.48	22.70%	0.68%	0.37%	3.52%
GWW	71 Outperform	$46.50B	24.78	58.98%	0.85%	4.19%	6.60%
WCC	70 Outperform	$7.51B	11.79	14.34%	1.10%	-2.53%	-4.03%
RYI	64 Neutral	$734.48M	37.86	-1.00%	3.60%	-9.98%	-106.51%
Sector *	62 Neutral	$7.50B	12.89	3.19%	3.38%	3.64%	-14.27%

* Industrials Sector Average

Performance Comparison

AIT

Applied Industrial Technologies

225.79

36.01

18.97%

DXPE

DXP Enterprises

79.14

25.12

46.50%

FAST

Fastenal Company

80.64

11.75

17.06%

GWW

WW Grainger

994.00

36.67

3.83%

WCC

Wesco International

148.42

-11.53

-7.21%

RYI

Ryerson Holdings

22.00

-9.54

-30.25%

Applied Industrial Technologies Earnings Call Summary

Earnings Call Date: Jan 29, 2025 | % Change Since: -10.32% | Next Earnings Date: May 1, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed outlook with significant achievements such as EBITDA and EPS growth, successful acquisition, and dividend increase. However, challenges in sales performance, particularly in December and January, and mixed end market demand tempered the overall positive sentiment.

Highlights

EBITDA and EPS Growth

EBITDA and EPS exceeded expectations, increasing approximately 3% and 7% over the prior year, respectively, driven by strong gross margin performance and cost controls.

Engineered Solutions Segment Margin Expansion

EBITDA margins in the Engineered Solutions segment expanded by 115 basis points over the prior year, exceeding 16% for the first time.

Hydradyne Acquisition

The strategic acquisition of Hydradyne, with anticipated sales of $260 million and EBITDA of $30 million in the first year, strengthens Applied Industrial Technologies' fluid power position.

Dividend Increase

The company announced a 24% increase in its quarterly dividend, reflecting strong earnings and cash generation.

Lowlights

Sales Decline and Market Challenges

Average daily sales declined 3.4% over the prior year, with mixed end market demand and customers managing MRO spending conservatively.

Soft Organic Sales Growth in December

Softer sales during the last two weeks of December negatively impacted the quarter's overall organic sales growth by approximately 100 basis points.

January Sales Trends

January sales are currently trending down a mid-single-digit percent year-over-year on an organic basis, with ongoing macro policy and interest rate uncertainty as headwinds.

Company Guidance

During the Fiscal 2025 Second Quarter Earnings Call for Applied Industrial Technologies, the company provided guidance that projected sales growth of 1% to 3% for the full fiscal year, with an updated EPS range of $9.65 to $10.05. EBITDA margins were expected to be between 12.2% and 12.4%. The company reported that the second quarter EBITDA and EPS exceeded expectations, growing approximately 3% and 7% year-over-year, respectively. Gross margin expanded 114 basis points to 30.6%, driven by strong channel execution and ongoing margin initiatives. The company also highlighted the positive impact of its recent acquisition of Hydradyne, expected to contribute $260 million in sales and $30 million in EBITDA within the first year of ownership. Despite a mid-single-digit decline in January sales, Applied Industrial Technologies remained optimistic about the demand outlook, supported by improving order trends in its Engineered Solutions segment.

Applied Industrial Technologies Corporate Events

M&A Transactions

Applied Industrial Technologies Completes Acquisition of Hydradyne

Positive

Jan 2, 2025

Applied Industrial Technologies announced the completion of its acquisition of Hydradyne, LLC, a provider of fluid power solutions, enhancing its distribution position in the U.S. The acquisition is expected to contribute significantly to Applied’s sales and EBITDA, with anticipated growth and operational momentum, and will be accretive to EPS within the first year.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.