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Why Is Applied Industrial Technologies (AIT) Up 16.8% Since Last Earnings Report?
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A month has gone by since the last earnings report for Applied Industrial Technologies (AIT - Free Report) . Shares have added about 16.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Applied Industrial Technologies due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Applied Industrial Tops on Q2 Earnings, Ups Dividend
Applied Industrial reported impressive results for second-quarter fiscal 2021 (ended Dec 31, 2020), with earnings surpassing estimates by 28.9%.
The company’s earnings in the fiscal second quarter were 98 cents per share, surpassing the Zacks Consensus Estimate of 76 cents. Earnings in the year-ago quarter were 97 cents.
Revenue Details
In the reported quarter, Applied Industrial’s net sales amounted to $751.3 million, down 9.9% year over year. The results were adversely impacted by a 10.5% fall in organic sales, partially offset by a 0.1% positive impact of foreign currency translation and a 0.5% gain from acquired assets.
However, Applied Industrial’s top line surpassed the Zacks Consensus Estimate of $730.7 million.
The company reports revenues under two market segments. A brief discussion of the quarterly results is provided below:
Service Center-Based Distribution’s revenues totaled $515.7 million, which contributed 68.6% to net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues declined 10.4%. Organic sales declined 10.5% and foreign currency translation had a positive impact of 0.1%. Demand was weak in the industrial end markets due to the pandemic-led woes.
The Fluid Power & Flow Control segment generated revenues of $235.6 million, contributing 31.4% to net revenues in the reported quarter. The figure decreased 8.5% year over year due to a 10.1% decline in organic sales, partially offset by a 1.6% gain from acquisitions.
The results suffered from weakness in the process-related, industrial and off-highway mobile markets. However, businesses flourished in life sciences, chemical, technology, transportation, utilities and aggregates end markets.
Margin Profile
In the reported quarter, Applied Industrial’s cost of sales declined 8.5% year over year to $541.8 million. Cost of sales was 72.1% of the quarter’s net sales. Gross profit in the quarter decreased 13.1% year over year to $209.5 million, while gross margin fell 110 basis points (bps) year over year to 27.9%.
Selling, distribution and administrative expenses (including depreciation) decreased 11% year over year to $162.4 million. It represented 21.6% of net sales in the reported quarter versus 21.9% in the year-ago quarter. Adjusted EBITDA were $68.3 million, reflecting a year-over-year decline of 8.4%. Margin decreased 10 bps year over year to 9.1%. Interest expenses declined 20.1% year over year to $7.7 million.
Balance Sheet & Cash Flow
Exiting the second quarter of fiscal 2021, Applied Industrial had cash and cash equivalents of $288.8 million, up 6.5% from $271.1 million recorded in the last reported quarter. Long-term debt decreased 1.2% sequentially to $783.1 million.
During the first six months of the fiscal year, the company repaid long-term debts of $72.3 million.
It generated net cash of $77.5 million from operating activities in the fiscal second quarter, reflecting an increase of 41.2% from the prior-year quarter. Capital spent on property purchase totaled $4.9 million compared with $7 million in the year-ago quarter. Free cash flow increased 51.8% year over year to $72.7 million.
In the first six months of fiscal 2021, the company rewarded shareholders with a dividend payout of $24.9 million. The amount represents growth of 3.7% year over year.
Also, the company’s board of directors approved a 3.1% hike in the quarterly dividend rate.
Outlook
The company believes that general economic uncertainties will persist in the quarters ahead. However, solid demand for engineered solutions, healthy cross-selling actions, benefits from acquired assets and a solid balance sheet will prove beneficial.
For the third quarter of fiscal 2021 (ending March 2021), it expects an organic sales decline of 3-4% on a year-over-year basis. Selling, administrative and distribution expenses are predicted to be $170-$175 million.
The Advanced Control Solutions and Gibson buyouts are anticipated to add $10-$11 million to sales in the fiscal third quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
Currently, Applied Industrial Technologies has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Applied Industrial Technologies has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Applied Industrial Technologies (AIT) Up 16.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Applied Industrial Technologies (AIT - Free Report) . Shares have added about 16.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Applied Industrial Technologies due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Applied Industrial Tops on Q2 Earnings, Ups Dividend
Applied Industrial reported impressive results for second-quarter fiscal 2021 (ended Dec 31, 2020), with earnings surpassing estimates by 28.9%.
The company’s earnings in the fiscal second quarter were 98 cents per share, surpassing the Zacks Consensus Estimate of 76 cents. Earnings in the year-ago quarter were 97 cents.
Revenue Details
In the reported quarter, Applied Industrial’s net sales amounted to $751.3 million, down 9.9% year over year. The results were adversely impacted by a 10.5% fall in organic sales, partially offset by a 0.1% positive impact of foreign currency translation and a 0.5% gain from acquired assets.
However, Applied Industrial’s top line surpassed the Zacks Consensus Estimate of $730.7 million.
The company reports revenues under two market segments. A brief discussion of the quarterly results is provided below:
Service Center-Based Distribution’s revenues totaled $515.7 million, which contributed 68.6% to net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues declined 10.4%. Organic sales declined 10.5% and foreign currency translation had a positive impact of 0.1%. Demand was weak in the industrial end markets due to the pandemic-led woes.
The Fluid Power & Flow Control segment generated revenues of $235.6 million, contributing 31.4% to net revenues in the reported quarter. The figure decreased 8.5% year over year due to a 10.1% decline in organic sales, partially offset by a 1.6% gain from acquisitions.
The results suffered from weakness in the process-related, industrial and off-highway mobile markets. However, businesses flourished in life sciences, chemical, technology, transportation, utilities and aggregates end markets.
Margin Profile
In the reported quarter, Applied Industrial’s cost of sales declined 8.5% year over year to $541.8 million. Cost of sales was 72.1% of the quarter’s net sales. Gross profit in the quarter decreased 13.1% year over year to $209.5 million, while gross margin fell 110 basis points (bps) year over year to 27.9%.
Selling, distribution and administrative expenses (including depreciation) decreased 11% year over year to $162.4 million. It represented 21.6% of net sales in the reported quarter versus 21.9% in the year-ago quarter. Adjusted EBITDA were $68.3 million, reflecting a year-over-year decline of 8.4%. Margin decreased 10 bps year over year to 9.1%. Interest expenses declined 20.1% year over year to $7.7 million.
Balance Sheet & Cash Flow
Exiting the second quarter of fiscal 2021, Applied Industrial had cash and cash equivalents of $288.8 million, up 6.5% from $271.1 million recorded in the last reported quarter. Long-term debt decreased 1.2% sequentially to $783.1 million.
During the first six months of the fiscal year, the company repaid long-term debts of $72.3 million.
It generated net cash of $77.5 million from operating activities in the fiscal second quarter, reflecting an increase of 41.2% from the prior-year quarter. Capital spent on property purchase totaled $4.9 million compared with $7 million in the year-ago quarter. Free cash flow increased 51.8% year over year to $72.7 million.
In the first six months of fiscal 2021, the company rewarded shareholders with a dividend payout of $24.9 million. The amount represents growth of 3.7% year over year.
Also, the company’s board of directors approved a 3.1% hike in the quarterly dividend rate.
Outlook
The company believes that general economic uncertainties will persist in the quarters ahead. However, solid demand for engineered solutions, healthy cross-selling actions, benefits from acquired assets and a solid balance sheet will prove beneficial.
For the third quarter of fiscal 2021 (ending March 2021), it expects an organic sales decline of 3-4% on a year-over-year basis. Selling, administrative and distribution expenses are predicted to be $170-$175 million.
The Advanced Control Solutions and Gibson buyouts are anticipated to add $10-$11 million to sales in the fiscal third quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
Currently, Applied Industrial Technologies has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Applied Industrial Technologies has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.