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Here's Why Applied Industrial (AIT) is an Attractive Bet

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Applied Industrial Technologies, Inc. (AIT - Free Report) is well poised for growth, courtesy of strength across its businesses, acquisitions, growth initiatives and a sound capital deployment strategy.

Zacks Investment Research
Image Source: Zacks Investment Research

The currently Zacks Rank #1 (Strong Buy) player has a market capitalization of $4.1 billion. In the past three months, the stock has gained 7.2% against the industry’s decline of 10.9%.

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

Business Strength: AIT stands to gain from its presence in the diverse end markets, which allows it to offset risks associated with a single market. In the quarters ahead, strength in Applied Industrial’s end markets, including technology, life sciences, off-highway mobile, pulp & paper, metals, lumber & wood, industrial machinery, and others will likely benefit AIT. Also, AIT’s cross-selling actions coupled with its focus on pricing and growth initiatives are likely to drive its performance. It is worth noting that organic revenues are projected to grow in high single-digit percentage from the year-ago reported figure for fourth-quarter fiscal 2022 (ending June 2022).

Acquisition Benefits: AIT intends to strengthen and expand its businesses through acquisitions. Applied Industrial’s acquisition of R.R. Floody in August 2021 boosted its product offerings in the automation technology space and expanded AIT’s reach across the U.S. Midwest market. Also, buyouts of Advanced Control Solutions (October 2020) and Gibson (January 2021) added value to its automation solution offerings. Buyouts contributed 0.4% to AIT’s revenues in third-quarter fiscal 2022 (ended March 2022).

Rewards to Shareholders: AIT remains committed toward rewarding its shareholders through dividend payouts and share-repurchase programs. For the nine months of fiscal 2022, AIT used $38.6 million for paying out dividends and repurchasing shares worth $13.6 million. Also, in January 2022, Applied Industrial announced a 3% hike in its quarterly dividend rate. Exiting the fiscal third quarter, AIT had 318,000 shares left to repurchase under its share repurchase program.

Key Initiatives: AIT’s value-added services, focus on improving the product line, cost-saving efforts and initiatives to drive its operational excellence are anticipated to be advantageous in the long run. Also, Applied Industrial’s investments in customer development initiatives, automation expansion, IIot and digital offerings are likely to be tailwinds.

Northbound Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for fiscal 2022 earnings has moved up from $5.92 to $6.24 on one upward estimate revision versus none downward. The consensus estimate for fiscal 2023 (ending June 2023) earnings has increased from $6.46 to $6.90 on one northward estimate revision against none southward.

Zacks Rank & Other Stocks to Consider

Some other top-ranked companies from the industrial products sector are discussed below:

IDEX Corporation (IEX - Free Report) presently has a Zacks Rank of 2. IEX delivered a trailing four-quarter earnings surprise of 2.8%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

IEX’s earnings estimates have increased 3.2% for 2022 in the past 60 days. Its shares have declined 1.4% in the past three months.

Roper Technologies, Inc. (ROP - Free Report) presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average.

In the past 60 days, ROP’s earnings estimates have increased 1.1% for 2022. The stock has declined 1.8% in the past three months.

Ferguson plc (FERG - Free Report) is presently Zacks #2 Ranked. FERG’s earnings surprise in the last four quarters was 14.2%, on average.

In the past 60 days, the stock’s earnings estimates have increased 6.5% for fiscal 2022 (ending July 2022). The same has declined 19% in the past three months.