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Here's Why it is Worth Buying Applied Industrial Stock Now

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Applied Industrial Technologies, Inc. (AIT - Free Report) seems an attractive investment option in the general industrial manufacturing space. The distributor of industrial products has compelling fundamental strength and its growth opportunities have increased its competitiveness. It presently carries Zacks Rank #2 (Buy).

The company is based in Cleveland, OH, and has a $3-billion market capitalization. It belongs to the Zacks Manufacturing – General Industrial industry, which comes under the ambit of the Zacks Industrial Products sector. Worth noting here is that the industry is currently in the top 33% (with a rank of 85) of more than 250 Zacks industries.

In the past three months, the company’s shares have gained 25.4% compared with the industry’s growth of 12.4%. Notably, the S&P 500 expanded 6.7%, while the sector advanced 16.7% during the same timeframe.




 

Below we have discussed why it is prudent to invest in Applied Industrial now.

Tailwinds: The company is well-poised to gain from its solid product offerings — including specialty flow control solutions, engineered fluid power components, power transmission products and bearings. Also, its focus on maintaining a healthy supply chain, address financial stress through cost-saving actions, and focus on providing value-added services will likely be beneficial.

In the long run, Applied Industrial anticipates generating revenues of $4.5 billion, while expects earnings before interest, tax, depreciation and amortization margin of 11%.

Buyouts: Over time, the company has expanded its product line, geographical reach and market share through acquisitions. It added MilRoc Distribution and Woodward Steel to its portfolio in March 2019, while acquired Olympus Controls in August 2019. Further, it bought Advanced Control Solutions in October this year. This buyout is predicted to boost the automation solutions business in multiple end markets.

Notably, the company’s sales increased 1.1% on the back of buyouts in first-quarter fiscal 2021. Buyouts positively impacted the Fluid Power & Flow Control segment’s sales by 3.8% on a year-over-year basis.

For second-quarter fiscal 2021, the company anticipates the Advanced Control Solutions buyout to boost sales by $6 million.

Reward to Shareholders: Applied Industrial ardently believes in returning values to shareholders — the preferred mode being the disbursement of dividends. Notably, its dividend payouts were $1.26 per share in fiscal 2020, higher than $1.18 in fiscal 2018.

Also, it distributed dividends of $12.4 million to its shareholders pertaining to the first quarter of fiscal 2021. This payment was higher than the previous-year quarter by 3.6%.

The company’s quarterly cash dividend rate is presently pegged at 32 cents and will be paid out on Nov 30, 2020, to shareholders of record as of Nov 16.

Earnings Estimate Trend: In the past 30 days, the company’s earnings estimates have been increased and suggest positive sentiments toward the stock. Notably, the Zacks Consensus Estimate for Applied Industrial’s earnings is pegged at $3.44 for fiscal 2021 (ending June 2021) and $4.00 for fiscal 2022 (ending June 2022), reflecting growth of 12.8% and 6.7% from the 30-day-ago numbers.

Also, estimates for the second quarter of fiscal 2021 (ending December 2020) grew 10.8% to 72 cents in the past 30 days. Two upward revision revisions in estimates were recorded for the second quarter, fiscal 2021 and fiscal 2022.

Other Key Picks

Some other top-ranked stocks in the industry are Altra Industrial Motion Corp. , EnPro Industries, Inc. (NPO - Free Report) and Graco Inc. (GGG - Free Report) . While Altra Industrial and EnPro sport a Zacks Rank #1 (Strong Buy), Graco carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 30 days, earnings estimates for these stocks have improved for the current year. Further, earnings surprise for the last reported quarter was 77.55% for Altra Industrial, 109.38% for EnPro and 40.48% for Graco.

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