Reasons Why Applied Industrial (AIT) Should Be in Your Portfolio
Applied Industrial Technologies, Inc. AIT stands to benefit from strength across its businesses, acquired assets and focus on improving the product line and operational excellence. The company remains focused on investing in growth opportunities and strengthening its long-term market position.
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The company has a market capitalization of $7.4 billion. Over the past six months, it has gained 16.1% compared with the industry’s 4.3% growth. AIT currently sports a Zacks Rank #1 (Strong Buy).
Let’s delve into the factors that have been aiding the firm for a while now.
Business Strength: Applied Industrial has been witnessing solid momentum across the food and beverage, lumber and wood, mining, pulp and paper, energy, utilities and refining end markets. Higher demand for technical Maintenance, Repair and Operations (‘MRO’) support and fluid power MRO services across the U.S. manufacturing sector is driving the Service Center Based Distribution segment’s revenues. Driven by strength across its business, the company predicts total sales to increase in the band of 1-2.5% year over year in fiscal 2024 (ending June 2024).
Acquisition Benefits: The company believes in adding complementary businesses to its portfolio via acquisitions. In May 2024, Applied Industrial acquired Grupo Kopar, a leading provider of automation technologies and engineered solutions. The buyout is likely to expand its automation platform and extend its footprint in Mexico. Also, the acquisitions of Bearing Distributors and Cangro (September 2023) enhanced AIT’s footprint and strategic growth initiatives across the U.S. Southeast and upper Northeast regions. In third-quarter fiscal 2024 (ended March 2024), buyouts had a contribution of 1.2% on the company's sales.
Shareholder-Friendly Policies: AIT remains committed to rewarding its shareholders through dividend payouts and share buybacks. For instance, in the first nine months of fiscal 2024, the company rewarded shareholders with dividends of $41.5 million, reflecting an increase of 4.3% year over year. Also, it hiked its quarterly dividend rate by 5.7% in January 2024.
Business Initiatives: Applied Industrial’s investments to expand automation, industrial Internet of Things, digital offerings and customer development initiatives are likely to be beneficial moving ahead. This apart, it is poised to gain from its focus on improving the product line, value-added services and initiatives to drive operational excellence.
Other Stocks to Consider
We have highlighted three other top-ranked stocks, namely Crane Company CR, Flowserve Corporation FLS and Kadant Inc. KAI. Each of these companies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Crane delivered a trailing four-quarter average earnings surprise of 15.2%. In the past 60 days, the Zacks Consensus Estimate for CR’s 2024 earnings has inched up 0.8%.
Flowserve has a trailing four-quarter average earnings surprise of 21.7%. The consensus estimate for FLS’ 2024 earnings has increased 1.5% in the past 60 days.
Kadant delivered a trailing four-quarter average earnings surprise of 19%. In the past 60 days, the consensus estimate for KAI’s 2024 earnings has improved 0.2%.
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