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Applied Industrial (AIT) Q1 Earnings Top Estimates, Fall Y/Y
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Applied Industrial Technologies, Inc. (AIT - Free Report) reported better-than-expected results for first-quarter fiscal 2021 (ended Sep 30, 2020), with earnings surpassing estimates by 39.06%. Also, sales surpassed the same by 2.99%. Notably, the company’s shares have gained 2.1% yesterday, with the trading session ending at $61.48.
The company’s earnings in the fiscal first quarter were 89 cents per share, surpassing the Zacks Consensus Estimate of 64 cents. However, quarterly earnings declined 11% from the year-ago quarter’s figure of $1.00 on weak sales performance and a decline in margin.
Revenue Details
In the reported quarter, Applied Industrial’s net sales amounted to $747.8 million, down 12.7% year over year. The results were adversely impacted by a 13.4% fall in organic sales and a 0.4% impact of forex woes, partially offset by a 1.1% gain from acquired assets. The company’s organic results suffered from the adverse impacts of the pandemic.
However, Applied Industrial’s top line surpassed the Zacks Consensus Estimate of $726 million.
On a geographical basis, sales generated in the United States were $644.1 million, down 13.3% year over year. The same in Canada decreased 13.7% to $56.9 million and that in other countries fell 1.3% to $46.9 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 $513.3 million, which contributed 68.6% to net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues declined 14.9%. Organic sales declined 14.4% and unfavorable movements in foreign currencies had an adverse impact of 0.5%. Demand was weak in the industrial end markets.
The Fluid Power & Flow Control segment generated revenues of $234.5 million, contributing 31.4% to net revenues in the reported quarter. The figure decreased 7.4% year over year due to an 11.2% decline in organic sales, partially offset by a 3.8% gain from acquisitions.
The results suffered from weakness in the process-related, industrial and off-highway mobile markets. However, businesses flourished in life sciences, food and beverage, and technology markets. Also, sales from automation and internal growth actions improved.
Margin Profile
In the reported quarter, Applied Industrial’s cost of sales declined 12.1% year over year to $532 million. Cost of sales was 71.1% of the quarter’s net sales. Gross profit in the quarter decreased 14.2% year over year to $215.8 million, while gross margin fell 50 basis points (bps) year over year to 28.9%.
Selling, distribution and administrative expenses (including depreciation) decreased 14.1% year over year to $163.5 million. It represented 21.9% of net sales in the reported quarter versus 22.2% in the year-ago quarter. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $67.6 million, reflecting a year-over-year decline of 13.6%. Margin decreased 10 bps year over year to 9%. Interest expenses declined 23.9% year over year to $7.7 million.
Balance Sheet & Cash Flow
Exiting the first quarter of fiscal 2021, Applied Industrial had cash and cash equivalents of $271.1 million, up 0.9% from $268.6 million recorded in the last reported quarter. Long-term debt decreased 7.3% sequentially to $792.8 million.
During the quarter, the company repaid long-term debts of $62.5 million.
The company generated net cash of $81.8 million from operating activities in the fiscal first quarter, reflecting an increase of 63.6% from the prior-year quarter. Capital spent on property purchase totaled $3.6 million compared with $4.9 million in the year-ago quarter. Free cash flow increased 73.6% year over year to $78.2 million.
In the quarter, the company rewarded shareholders with a dividend payout of $12.4 million. The amount represents growth of 3.6% year over year.
Dividend
Concurrent with the earnings release, the company announced that its board of directors approved the payment of a quarterly dividend of 32 cents to shareholders of record as of Nov 16. The disbursement will be made on Nov 30, 2020.
Outlook
For the second quarter of fiscal 2020 (ending December 2020), it expects an organic sales decline of 13-14% on a year-over-year basis. Also, the Advanced Control Solutions buyout is anticipated to add $6 million to sales.
For fiscal 2021 (ending June 2021), the company did not reinstate its financial projections due to the uncertainties related to the pandemic.
Applied Industrial Technologies, Inc. Price, Consensus and EPS Surprise
In the past 60 days, earnings estimates for Altra Industrial and Dover have improved for the current year while remained stable for EnPro. Further, positive earnings surprise in the last reported quarter was 77.55% for Altra Industrial, 980% for EnPro and 22.14% for Dover.
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Applied Industrial (AIT) Q1 Earnings Top Estimates, Fall Y/Y
Applied Industrial Technologies, Inc. (AIT - Free Report) reported better-than-expected results for first-quarter fiscal 2021 (ended Sep 30, 2020), with earnings surpassing estimates by 39.06%. Also, sales surpassed the same by 2.99%. Notably, the company’s shares have gained 2.1% yesterday, with the trading session ending at $61.48.
The company’s earnings in the fiscal first quarter were 89 cents per share, surpassing the Zacks Consensus Estimate of 64 cents. However, quarterly earnings declined 11% from the year-ago quarter’s figure of $1.00 on weak sales performance and a decline in margin.
Revenue Details
In the reported quarter, Applied Industrial’s net sales amounted to $747.8 million, down 12.7% year over year. The results were adversely impacted by a 13.4% fall in organic sales and a 0.4% impact of forex woes, partially offset by a 1.1% gain from acquired assets. The company’s organic results suffered from the adverse impacts of the pandemic.
However, Applied Industrial’s top line surpassed the Zacks Consensus Estimate of $726 million.
On a geographical basis, sales generated in the United States were $644.1 million, down 13.3% year over year. The same in Canada decreased 13.7% to $56.9 million and that in other countries fell 1.3% to $46.9 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 $513.3 million, which contributed 68.6% to net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues declined 14.9%. Organic sales declined 14.4% and unfavorable movements in foreign currencies had an adverse impact of 0.5%. Demand was weak in the industrial end markets.
The Fluid Power & Flow Control segment generated revenues of $234.5 million, contributing 31.4% to net revenues in the reported quarter. The figure decreased 7.4% year over year due to an 11.2% decline in organic sales, partially offset by a 3.8% gain from acquisitions.
The results suffered from weakness in the process-related, industrial and off-highway mobile markets. However, businesses flourished in life sciences, food and beverage, and technology markets. Also, sales from automation and internal growth actions improved.
Margin Profile
In the reported quarter, Applied Industrial’s cost of sales declined 12.1% year over year to $532 million. Cost of sales was 71.1% of the quarter’s net sales. Gross profit in the quarter decreased 14.2% year over year to $215.8 million, while gross margin fell 50 basis points (bps) year over year to 28.9%.
Selling, distribution and administrative expenses (including depreciation) decreased 14.1% year over year to $163.5 million. It represented 21.9% of net sales in the reported quarter versus 22.2% in the year-ago quarter. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $67.6 million, reflecting a year-over-year decline of 13.6%. Margin decreased 10 bps year over year to 9%. Interest expenses declined 23.9% year over year to $7.7 million.
Balance Sheet & Cash Flow
Exiting the first quarter of fiscal 2021, Applied Industrial had cash and cash equivalents of $271.1 million, up 0.9% from $268.6 million recorded in the last reported quarter. Long-term debt decreased 7.3% sequentially to $792.8 million.
During the quarter, the company repaid long-term debts of $62.5 million.
The company generated net cash of $81.8 million from operating activities in the fiscal first quarter, reflecting an increase of 63.6% from the prior-year quarter. Capital spent on property purchase totaled $3.6 million compared with $4.9 million in the year-ago quarter. Free cash flow increased 73.6% year over year to $78.2 million.
In the quarter, the company rewarded shareholders with a dividend payout of $12.4 million. The amount represents growth of 3.6% year over year.
Dividend
Concurrent with the earnings release, the company announced that its board of directors approved the payment of a quarterly dividend of 32 cents to shareholders of record as of Nov 16. The disbursement will be made on Nov 30, 2020.
Outlook
For the second quarter of fiscal 2020 (ending December 2020), it expects an organic sales decline of 13-14% on a year-over-year basis. Also, the Advanced Control Solutions buyout is anticipated to add $6 million to sales.
For fiscal 2021 (ending June 2021), the company did not reinstate its financial projections due to the uncertainties related to the pandemic.
Applied Industrial Technologies, Inc. Price, Consensus and EPS Surprise
Applied Industrial Technologies, Inc. price-consensus-eps-surprise-chart | Applied Industrial Technologies, Inc. Quote
Zacks Rank & Other Stocks to Consider
With a market capitalization of $2.3 billion, Applied Industrial currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the industry are Altra Industrial Motion Corp. , EnPro Industries, Inc. (NPO - Free Report) and Dover Corporation (DOV - Free Report) . While Altra Industrial and EnPro sport a Zacks Rank #1 (Strong Buy), Dover carries a Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for Altra Industrial and Dover have improved for the current year while remained stable for EnPro. Further, positive earnings surprise in the last reported quarter was 77.55% for Altra Industrial, 980% for EnPro and 22.14% for Dover.
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Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>