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Growth & Income

Applied Industrial Technologies, Inc. (AIT - Snapshot Report) has delivered 10 straight positive earnings surprises with an average beat of almost 6.9% for the last four quarters. This Zacks #2 Rank (Buy) industrial equipment provider has been consistently distributing dividends for more than 50 years and currently has a solid 2.1% yield. Its solid fiscal fourth-quarter results and its strategic acquisitions bode well for the future.

Driving Catalysts

On August 9, Applied Industrial Technologies reported fiscal fourth quarter 2012 earnings per share of 75 cents, surpassing the Zacks Consensus Estimate by 7.1% and the year-ago earnings by 15.4%. Net sales jumped 5.1% year over year to $620.0 million.

For fiscal 2012, earnings per share came in at $2.54 versus $2.24 in fiscal 2011, while net revenue jumped 7.3% to $2.4 billion.

Acquisitions have been the company’s strength for a long time. In fiscal 2012, the company completed three strategic acquisitions in Canada. Recently, Applied Industrial Technologies successfully acquired SKF Group’s company-owned distribution business in Australia and New Zealand.

Promising Outlook

Inspired by its fiscal 2012 financial performance, Applied Industrial Technologies looks forward to benefits from industrial economic development. The company expects total revenue to grow 9% to 13% in fiscal 2013 with earnings per share between $2.90 and $3.05.

Earnings Estimates Move Higher

Over the last 7 days, two of 4 estimates increased for fiscal 2013, pushing the Zacks Consensus Estimate up by 7.2% to $2.96 per share. Meanwhile for fiscal 2014, the Zacks Consensus Estimate moved up 3.6% to $3.18 per share.

These estimates represent year-over-year earnings growth of 13.5% for fiscal 2013 and 7.3% for fiscal 2014.

Dividend

Regular dividend payments and increases at intervals have been the company’s most attractive and laudatory features. A 5-Year average dividend yield for Applied Industrial Technologies stands at 2.3%, while the stock currently yields a solid 2.1% based on its quarterly dividend of 21 cents.

Valuation

Applied Industrial Technologies is currently trading at a forward P/E of 13.6x, compared with 14.2x of for the peer group. The company’s PEG ratio is currently at 0.89. ROE stands at 17.0% compared with the peer group average of 18.1%.

As can be observed from the Price & EPS Surprise chart below, the company has beaten the Zacks Consensus Estimate for 10 straight quarters.

Regular dividend payouts, strategic acquisitions, upbeat results and a promising outlook make Applied Industrial Technologies an attractive investment option.

Headquartered in Cleveland, Ohio, Applied Industrial Technologies was incorporated in 1923. The $1.7 billion company operates in the Industrial Equipment Wholesale industry and distributes industrial products for MRO needs of machinery and equipment. Services are offered in U.S., Canada and Mexico through roughly 500 facilities.

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