Applied Industrial Technologies, Inc. (NYSE:AIT) defied analyst predictions to release its quarterly results, which were ahead of market expectations. The company beat both earnings and revenue forecasts, with revenue of US$748m, some 2.8% above estimates, and statutory earnings per share (EPS) coming in at US$0.89, 46% ahead of expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Following the recent earnings report, the consensus from four analysts covering Applied Industrial Technologies is for revenues of US$3.03b in 2021, implying a small 3.4% decline in sales compared to the last 12 months. Per-share earnings are expected to shoot up 568% to US$3.46. Before this earnings report, the analysts had been forecasting revenues of US$3.01b and earnings per share (EPS) of US$3.05 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the substantial gain in earnings per share expectations following these results.
There's been no major changes to the consensus price target of US$76.00, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Applied Industrial Technologies, with the most bullish analyst valuing it at US$76.00 and the most bearish at US$75.00 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Applied Industrial Technologies' past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 3.4%, a significant reduction from annual growth of 7.4% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.7% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Applied Industrial Technologies is expected to lag the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Applied Industrial Technologies following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Applied Industrial Technologies' revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$76.00, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Applied Industrial Technologies. Long-term earnings power is much more important than next year's profits. We have forecasts for Applied Industrial Technologies going out to 2023, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 5 warning signs for Applied Industrial Technologies that you should be aware of.
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