Applied Industrial Technologies, Inc. (AIT Quick QuoteAIT - Free Report) continues to benefit from strong demand for technical MRO services, which remains a key support for its Service Center Based Distribution segment. In the third quarter of fiscal 2026 (ended March 31, 2026), the segment’s organic sales rose 4.2% year over year, with U.S. organic sales up in high single-digits as the cross-selling initiative improved.

Volume gains in fluid power and automation operations are aiding the Engineered Solutions segment. Improved growth in flow control operations also bodes well for the segment. In the fiscal third quarter, its organic sales increased 9.3% on a year-over-year basis.

The company continues to add assets that expand capabilities and geographic reach. In the fiscal third quarter, buyouts had a positive impact of 0.5% on the company's sales. The company announced the bolt-on acquisition of Thompson Industrial Supply (in January 2026), which is expected to generate approximately $20 million of annual sales in its first year. Also, in May 2025, the company acquired IRIS Factory Automation (“IRIS”), which boosted its automation offerings.

Applied Industrial continues to deploy capital through dividends, buybacks and targeted acquisitions, supported by liquidity and low leverage. In the first nine months of fiscal 2026, it paid out dividends worth $53.7 million, up 15.2% on a year-over-year basis. Also, the company increased its quarterly dividend by 11% to 51 cents per share in January 2026. 

AIT also repurchased shares worth $236.4 million during the first nine months of the fiscal year. In April 2026, the company’s board of directors authorized a new share buyback program (replacing the April 2025 share buyback program) to repurchase up to 3 million shares of its common stock. Exiting the fiscal third quarter, it was left with repurchasing 402,885 shares.

AIT’s Price Performance

Image Source: Zacks Investment Research

Shares of the Zacks Rank #3 (Hold) have surged 33.2% in the past three months compared with the industry’s growth of 6.5%.

Despite the positives, Applied Industrial has been experiencing rising expenses for a while. In the first nine months of fiscal 2026, the company’s cost of sales was up 8.1% year over year. Also, in the same period, the company witnessed a 9.4% year-over-year increase in SG&A expenses (including depreciation) due to higher costs associated with acquired businesses. 

LIFO expense increased significantly to $15.1 million in the first nine months of the fiscal year from $4.8 million in the year-ago period. The company expects LIFO expense to rise further in the fiscal fourth quarter, which could pressure reported margins even though the company’s underlying operating performance remains strong.  

Apart from this, the ongoing supply-chain constraints, particularly related to electronic components, remain another concern.

Key Picks

Some better-ranked stocks from the same space are discussed below.

Helios Technologies (HLIO Quick QuoteHLIO - Free Report) currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

HLIO delivered a trailing four-quarter average earnings surprise of 15.7%. In the past 60 days, the Zacks Consensus Estimate for Helios Technologies’ 2026 earnings has increased 5.5%.

The Middleby Corporation (MIDD Quick QuoteMIDD - Free Report) presently carries a Zacks Rank #2 (Buy). MIDD delivered a trailing four-quarter average earnings surprise of 10.4%.

In the past 60 days, the consensus estimate for Middleby’s 2026 earnings has increased 2.8%.

IDEX Corporation (IEX Quick QuoteIEX - Free Report) presently carries a Zacks Rank of 2. IEX delivered a trailing four-quarter average earnings surprise of 6%.

In the past 60 days, the consensus estimate for IDEX’s 2026 earnings has increased 3%.