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Here's Why it is Worth Investing in Applied Industrial (AIT)

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Applied Industrial Technologies, Inc. (AIT - Free Report) currently boasts robust prospects on strength in its businesses, solid product portfolio, acquired assets and a sound capital-deployment strategy.

The Zacks Rank #2 (Buy) company has a market capitalization of $3.7 billion. In the past six months, it has gained 11% against the industry’s decline of 9.8%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Let’s delve into the factors that make investment in the company a smart choice at the moment.

Business Strength: Applied Industrial is poised to benefit from the healthy demand for products and solutions in end markets like technology, food & beverage, lumber & wood, metals, industrial machinery, chemicals, utilities and mining. Also, the company’s focus on pricing and cross-selling actions, along with growth initiatives, are likely to drive its performance in the quarters ahead. For fiscal 2022 (ending June 2022), it expects to generate organic sales growth of 10.5-11.5% on a year-over-year basis.

Acquisition Benefits:  The company intends to strengthen and expand its businesses through acquisitions. Applied Industrial’s acquisition of R.R. Floody (August 2021) has strengthened its offerings in the automation technology space. Also, the company’s buyout of Gibson Engineering Company (January 2021) and Advanced Control Solutions (October 2020) enhanced its range of automation solution offerings across various end markets. In the first quarter (ended September 2021) and second quarter (ended December 2021) of fiscal 2022, buyouts contributed 2.1% and 1.6% to the company's sales, respectively.

Rewards to Shareholders: It remains focused on rewarding shareholders through dividend payouts and share buybacks. In the first six months of fiscal 2022, Applied Industrial used $25.5 million for paying out dividends and repurchasing shares worth $10.1 million. The quarterly dividend rate was hiked 3% in January 2022. Also, at the end of the fiscal second quarter, the company had 353,000 shares left for repurchase under its share repurchase program.

Initiatives: The company’s investments in expanding automation, IIoT and digital offerings and customer development initiatives are likely to drive its performance in the quarters ahead. Also, its focus on operational excellence and cost-saving measures might be beneficial.

In the past 30 days, the Zacks Consensus Estimate for its fiscal 2022 earnings has trended up from $5.41 to $5.92 on one upward estimate revision against none downward.

Other Key Picks

Some other top-ranked companies in the industry are discussed below.

Ferguson plc (FERG - Free Report) presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Its earnings surprise in the last reported quarter was 16.82%, on average.

Ferguson’s earnings estimates increased 0.1% for fiscal 2022 (ending July 2022) and 0.6% for fiscal 2023 (ending July 2023) in the past 30 days. Its shares have gained 9% in the past six months.

Graco Inc. (GGG - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 2.46%, on average.

In the past 30 days, Graco’s earnings estimates have increased 1.1% for 2022 but decreased 1.7% for 2022. GGG’s shares have lost 7.8% in the past six months.

Dover Corporation (DOV - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 12.34%, on average.

Dover’s earnings estimates have increased 4.2% for 2022 and 9% for 2023 in the past 30 days. Its shares have lost 3.5% in the past six months.