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Applied Industrial's Shares Gain on Solid Growth Drivers

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Applied Industrial Technologies, Inc.’s (AIT - Free Report) updated research report was issued on June 4. Over the last year shares of the company have rallied nearly 16.2% on the back of its robust growth drivers.

Remaining almost flat in the past few quarters, Applied Industrial’s revenues rebounded in third-quarter fiscal 2018 (ended March 2018). Eliminating acquisition and currency impact, the top line improved 6.7% organically in the reported quarter. The company expects that sturdier demand from all industrial end-markets and favorable currency translation impact will continue to drive its revenues, going ahead.

Notably, the company anticipates to secure sales growth in the 17.5-18.5% range in fiscal 2018 (ending June 2018), higher than the prior projection of 6-7%. Per our estimates, the company’s revenues are projected to grow by 18.3% and 15.9% for fiscals 2018 and 2019, respectively.  

Applied Industrial has been steadily widening its margins on the back of disciplined cost management, increased productivity and new enterprise resource planning investments. Also, lower corporate tax rates will likely aid in strengthening profitability in the upcoming quarters.

The company currently expects to generate earnings of $3.51-$3.61 per share in fiscal 2018, higher than the prior view of $3.40-$3.50 per share. The Zacks Consensus Estimate for the company’s earnings for fiscal 2019 moved up 4.9% to $4.67, in the past 60 days.  

Over the past month, shares of this Zacks Rank #1 (Strong Buy) company have rallied 6%, as against the 0.3% loss recorded by the industry.


The company has been strengthening its inorganic growth trajectory on the back of strategic acquisitions. For instance, the acquisition of Sentinel Fluid Controls (Mar 6, 2017) is currently fortifying the company’s Fluid Power business. Moreover, the FCX Performance buyout (January 2018) is also proving conducive to the company’s Specialty Flow Control business.

The company stated that FCX Performance will boost its sales by $550 million and earnings before interest, taxes, depreciation and amortization (EBITDA) by $68 million within 12 months of the deal’s closure. Notably, this acquisition is anticipated to bolster earnings in fiscal 2019 as well.

Applied Industrial also remains in track to boost its shareholders’ value. In the first nine months of fiscal 2018, the company repurchased 393,300 shares for $22.8 million and had authorization to buy back another 1,056,700 shares as of Mar 31, 2018.

Other Stocks to Consider

Some other top-ranked stocks in the same space are listed below:

Axon Enterprise, Inc. (AAXN - Free Report) sports a Zacks Rank of 1. The company’s earnings per share (EPS) are predicted to grow 25% in the next three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.

Graco Inc. (GGG - Free Report) also flaunts a Zacks Rank #1. The company’s EPS is estimated to be up 10.30% over the next three to five years.

IDEX Corp. (IEX - Free Report) holds a Zacks Rank #2. The company’s EPS will likely be up 11% during the same time frame.

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