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AIT

Applied Industrial Technologies NYSE:AIT Stock Report

Last Price

US$99.70

Market Cap

US$3.8b

7D

-3.7%

1Y

8.2%

Updated

28 Sep, 2022

Data

Company Financials +
AIT fundamental analysis
Snowflake Score
Valuation2/6
Future Growth2/6
Past Performance6/6
Financial Health4/6
Dividends4/6

AIT Stock Overview

Applied Industrial Technologies, Inc. distributes industrial motion, power, control, and automation technology solutions in North America, Australia, New Zealand, and Singapore.

Applied Industrial Technologies, Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Applied Industrial Technologies
Historical stock prices
Current Share PriceUS$99.70
52 Week HighUS$121.20
52 Week LowUS$88.09
Beta1.19
1 Month Change-8.30%
3 Month Change3.67%
1 Year Change8.17%
3 Year Change85.87%
5 Year Change51.41%
Change since IPO1,686.66%

Recent News & Updates

Aug 23
What Is Applied Industrial Technologies, Inc.'s (NYSE:AIT) Share Price Doing?

What Is Applied Industrial Technologies, Inc.'s (NYSE:AIT) Share Price Doing?

While Applied Industrial Technologies, Inc. ( NYSE:AIT ) might not be the most widely known stock at the moment, it saw...

Aug 17

Applied Industrial Technologies: Still An Underappreciated Industrial Growth Story

AIT ended its fiscal year with a strong fourth quarter that saw high-teens revenue growth, margin expansion, and higher guidance for the next fiscal year. Management's guidance calls for a cooling off across its end-markets, which seems reasonable, but the longer-term growth outlook is still attractive, particularly in its still-small automation businesses. Mid-single-digit revenue growth and high single-digit FCF growth can support a high single-digit return from here, but there is some near-term risk of sentiment/cycle rotation. I can’t really complain about the performance of Applied Industrial Technologies (AIT) since my last update, as this leading distributor of fluid power, power transmission, and flow control components has continued to outperform the broader industrial sector. Up about 18% over that time, AIT has handily outpaced suppliers like Parker-Hannifin (PH), other distributors like Fastenal (FAST), and most of its customer base as well. It’s certainly true that trees don’t grow to the sky and AIT cannot maintain a high-teens revenue growth pace for much longer. Still, the company remains strongly leveraged to the ongoing “catch-up cycle” as companies work to deliver on their backlogs, as well as longer-term secular growth drivers like automation and decarbonization. Share price outperformance has shrunk some of the discount to fair value here, but I believe this remains a well-run and under-known small/mid-cap industrial with above-average growth potential. Closing The Fiscal Year Strong The relatively scant coverage on AIT does mitigate some of the impact of beating expectations, but the fact remains that AIT closed its fiscal year on a strong note, with not only better than expected fiscal fourth quarter results, but also stronger guidance for the next fiscal year. Revenue rose 19% year over year and about 9% quarter over quarter in organic terms, beating expectations by about 8%. Service Center revenue rose 21%, while Fluid Power revenue rose 14%. As-reported gross margin declined 50bp yoy and 40bp qoq, but that included a nearly 140bp impact from LIFO accounting, so I would say that AIT is handling inflationary pressures relatively well – as I’ve mentioned in the past, the nature of the business (including hard-to-replicate assemblies and sub-assemblies, and break/fix demand) tends to shield the business from price/margin pressure somewhat more than your typical distributor, where online competition and increased customer price visibility have become more challenging. EBITDA rose more than 26%, with margin improving 70bp to 11.3%. Operating income rose 35%, with margin improving 120bp to 10.3%. At the segment level, Service Center profits rose 31% (margin up 110bp to 12.3%), while Fluid Power profits rose 17%, with margin up 20bp to 13.1%. AIT’s full-year results were comfortably ahead of my estimates when I last wrote on the stock, with revenue beating by 5% and EBITDA beating by 11%. Free cash flow was quite a bit lower than I expected, though (about 28% lower), due to a much greater increase in working capital needs. Cooling Off, But Still Going Strong With management noting double-digit growth continuing so far in the fiscal first quarter, the full fiscal year guidance of 3% to 7% clearly calls for a slowdown in the not-so-distant future. Given difficult comps (Q1’22 revenue was up 16%, Q2’22 was up 16%, and Q3’22 was up 15%), that doesn’t seem like unreasonable guidance, particularly as customers catch up on their own backlogs and continue to face constraints from label availability. Still, there could be upside to this guidance if the U.S. economy avoids a recession. Price contributed 500bp to growth this quarter, which is meaningful, but that still means mid-teens year-over-year volume growth, and management noted that 25 of its 30 top industry verticals were up yoy in the quarter. As you might expect, resource industries feature prominently on the list of strongest verticals (metals, aggregates, pulp/paper, energy, chemicals, et al), although machinery demand is still strong. It looks as though the food/beverage and life sciences verticals have cooled some, but I think that may be related to “digestion” of recent capex investments as well as bottlenecks in other areas of their supply chains. On the subject of supply chains, AIT management reported no real improvement thus far. Component availability remains a challenge, and it seems to be having an outsized impact on fluid power systems/assemblies (which likely explains the lesser margin leverage this quarter). While those supply chain limitations are a headache, I would argue they also suggest ongoing robust core demand in the Service Center business as AIT’s customers will need those components and supplies to keep their factories running and trying to work down backlogs. Automation Still A Longer-Term Driver Management doesn’t offer a lot of detail in its discussions of the company’s automation exposure, but they did note that sales rose 6% this quarter. While that’s a noticeable deceleration relative to my last article (when the automation business was still growing 25%), it’s worth noting the year-ago comp (up around 40% or so). It’s also worth noting that there have been some recent areas of softness in automation spending as companies prioritize maximizing near-term production and as bottlenecks in other components/equipment lead to delays in automation capex installations. Longer term, though, I continue to believe that automation is an underappreciated driver for AIT. Largely through M&A, AIT has been building a set of capabilities across robots/cobots, motion control, and machine vision, including design, assembly, and integration work, and as more companies look to automate production processes, I expect demand to remain healthy for several years. The Outlook Typically investors have done well to be cautious with stocks like AIT at this point in the cycle. Certainly management expects a deceleration from here, even though guidance for FY’23 was still comfortably above sell-side expectations (including a roughly 60bp upgrade to EBITDA margin relative to my prior expectations). My concern, then, is that AIT could continue to do well, but that the deceleration in revenue and profits leads investors to bail out in search of greener pastures.

Shareholder Returns

AITUS Trade DistributorsUS Market
7D-3.7%-1.9%-2.0%
1Y8.2%-10.3%-20.3%

Return vs Industry: AIT exceeded the US Trade Distributors industry which returned -12.7% over the past year.

Return vs Market: AIT exceeded the US Market which returned -22.1% over the past year.

Price Volatility

Is AIT's price volatile compared to industry and market?
AIT volatility
AIT Average Weekly Movement5.4%
Trade Distributors Industry Average Movement5.8%
Market Average Movement6.9%
10% most volatile stocks in US Market15.8%
10% least volatile stocks in US Market2.8%

Stable Share Price: AIT is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: AIT's weekly volatility (5%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
19236,100Neil Schrimsherhttps://www.applied.com

Applied Industrial Technologies, Inc. distributes industrial motion, power, control, and automation technology solutions in North America, Australia, New Zealand, and Singapore. It operates through two segments, Service Center Based Distribution, and Fluid Power & Flow Control. The company distributes bearings, power transmission products, engineered fluid power components and systems, specialty flow control solutions, advanced automation products, industrial rubber products, linear motion components, automation solutions, tools, safety products, oilfield supplies, and other industrial and maintenance supplies; and motors, belting, drives, couplings, pumps, hydraulic and pneumatic components, filtration supplies, valves, fittings, process instrumentation, actuators, and hoses, filtration supplies, as well as other related supplies for general operational needs of customers’ machinery and equipment.

Applied Industrial Technologies, Inc. Fundamentals Summary

How do Applied Industrial Technologies's earnings and revenue compare to its market cap?
AIT fundamental statistics
Market CapUS$3.85b
Earnings (TTM)US$257.41m
Revenue (TTM)US$3.81b

14.9x

P/E Ratio

1.0x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
AIT income statement (TTM)
RevenueUS$3.81b
Cost of RevenueUS$2.70b
Gross ProfitUS$1.11b
Other ExpensesUS$849.50m
EarningsUS$257.41m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)6.67
Gross Margin29.05%
Net Profit Margin6.76%
Debt/Equity Ratio60.0%

How did AIT perform over the long term?

See historical performance and comparison

Dividends

1.4%

Current Dividend Yield

20%

Payout Ratio