Applied Industrial Technologies (AIT) AI Stock Analysis

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Applied Industrial Technologies

(NYSE:AIT)

Rating:71Outperform

Price Target:

$249.00

▲(10.34%Upside)

Applied Industrial Technologies maintains a solid financial position with strong profitability and cash generation, which are major strengths. Despite the positive financials, technical indicators suggest potential short-term bearish momentum. The earnings call presented a mixed outlook, with strong margin performance offset by market challenges and macroeconomic uncertainties.

Positive Factors

Acquisitions

The acquisition of Hydradyne is expected to contribute significantly to AIT's growth story, with projected sales and EBITDA expected to be accretive to earnings per share.

Earnings

Applied Industrial Technologies reported a strong performance with F2Q earnings per share exceeding both internal estimates and consensus expectations.

Financial Health

Ample capacity remains for additional mergers and acquisitions, as well as other capital deployment opportunities, indicating strong financial health.

Negative Factors

Market Conditions

Organic sales were still negative with a weaker December and the first two weeks of January.

Sales Growth

Organic daily sales showed a decline, indicating challenges in maintaining sales growth in certain sectors.

Applied Industrial Technologies (AIT) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$8.77B

Dividend Yield0.8%

Average Volume (3M)360.75K

Price to Earnings (P/E)22.6

Beta (1Y)1.13

Revenue Growth0.50%

EPS Growth4.48%

CountryUS

Employees6,818

SectorIndustrials

Sector Strength87

IndustryIndustrial - Distribution

Share Statistics

EPS (TTM)2.57

Shares Outstanding38,084,640

10 Day Avg. Volume270,197

30 Day Avg. Volume360,751

Financial Highlights & Ratios

PEG Ratio0.47

Price to Book (P/B)3.83

Price to Sales (P/S)0.00

P/FCF Ratio17.60

Enterprise Value/Market Cap0.67

Enterprise Value/Revenue0.33

Enterprise Value/Gross Profit4.34

Enterprise Value/Ebitda2.69

Forecast

1Y Price Target

$276.00

Price Target Upside22.31% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering6

Applied Industrial Technologies Business Overview & Revenue Model

Company DescriptionApplied Industrial Technologies (AIT) is a leading industrial distributor and service provider that specializes in delivering a wide range of products and services for maintenance, repair, operations, and production across various industries. The company operates in sectors such as fluid power, flow control, bearings, power transmission, industrial rubber products, and general maintenance supplies. AIT serves a diverse customer base, including manufacturing, energy, transportation, and infrastructure sectors, through its extensive network of service centers and distribution facilities.

How the Company Makes MoneyApplied Industrial Technologies generates revenue primarily through the distribution and sale of industrial products and components, as well as by providing value-added services such as engineering, design, assembly, and maintenance. The company's key revenue streams include product sales, service contracts, and customized solutions tailored to specific customer needs. AIT benefits from strategic partnerships with leading manufacturers and suppliers, allowing it to offer a comprehensive portfolio of high-quality products. Additionally, the company's extensive distribution network and focus on customer service enhance its ability to cross-sell and upsell products and services, contributing to its overall earnings.

Applied Industrial Technologies Earnings Call Summary

Earnings Call Date:May 01, 2025

(Q3-2025)

% Change Since: -7.06%|

Next Earnings Date:Aug 07, 2025

Earnings Call Sentiment Neutral

The earnings call highlights strong margin expansion, record cash generation, and successful M&A activity. However, it acknowledges challenges in organic sales decline, market conditions, and macroeconomic uncertainty. Positive order trends and share repurchase plans provide optimism for future growth.

Q3-2025 Updates

Positive Updates

Strong Margin Expansion

Gross margins and EBITDA margins exceeded expectations, increasing 95 and 59 basis points respectively over the prior year.

Record Cash Generation

Free cash flow increased by 50% year-over-year in the third quarter, with a 39% increase year-to-date.

Successful M&A Activity

Significant capital deployment of $440 million, including the acquisition of Hydradyne and the announced acquisition of IRIS Factory Automation.

Positive Order Trends

Engineered Solutions segment saw a 3% year-over-year and 8% sequential increase in orders, with automation orders up over 30% year-over-year.

Share Repurchase Program

Repurchased over 330,000 shares for approximately $80 million year-to-date and announced a new $1.5 million share repurchase authorization.

Negative Updates

Organic Sales Decline

Third-quarter organic sales declined by 3%, with continued softness in the OEM fluid power markets.

Challenging Market Conditions

Ongoing muted end market backdrop with customers conservatively managing MRO and capital spending.

Macroeconomic Uncertainty

Economic uncertainty due to evolving global trade policies and potential tariffs affecting customer spending.

Sector-Specific Weakness

Continued sales declines in machinery, metals, and utilities markets.

Company Guidance

During the Fiscal 2025 Third Quarter Earnings Call for Applied Industrial Technologies, the company provided guidance indicating a cautious outlook amid ongoing economic uncertainty. The company adjusted its full-year fiscal 2025 guidance, projecting EPS in the range of $9.85 to $10 and sales growth between flat to 1%. This includes an anticipated organic sales decline of 4% to 3% and EBITDA margins of 12.3% to 12.4%. In the third quarter, gross margins exceeded expectations, increasing by 95 basis points year-over-year, while EBITDA margins rose by 59 basis points. The company achieved free cash flow growth of 50% year-over-year in the third quarter and 39% year-to-date, supported by solid working capital management and cost control initiatives. The guidance reflects potential impacts from global trade uncertainties and customer caution in capital spending, with expectations of a mid to low single-digit decline in organic daily sales for the fourth quarter. Despite these challenges, Applied Industrial Technologies remains focused on leveraging its strategic initiatives and strong market position for long-term growth.

Applied Industrial Technologies Financial Statement Overview

Summary

Applied Industrial Technologies demonstrates robust financial health with consistent revenue growth, strong profitability, and excellent cash flow generation capabilities. The low leverage and high return on equity further strengthen the company's financial position.

Income Statement

Very Positive

AIT has demonstrated strong financial performance with consistent revenue growth over the years. The Gross Profit Margin stands at 30.04% TTM, showing efficiency in managing production costs. The Net Profit Margin is 8.64% TTM, reflecting effective cost management and profitability. Revenue has grown from $3.23 billion in 2021 to $4.50 billion TTM, indicating robust growth. The EBIT Margin is 11.29% TTM, and the EBITDA Margin is 12.07% TTM, showcasing strong operational efficiency.

Balance Sheet

Positive

The company has a solid balance sheet with a Debt-to-Equity ratio of 0.18 TTM, indicating low leverage and financial stability. Return on Equity (ROE) is robust at 12.47% TTM, showcasing strong returns for shareholders. The Equity Ratio is 100%, highlighting a strong equity base and low reliance on debt.

Cash Flow

Very Positive

AIT's cash flow is strong, with a Free Cash Flow growth rate of 26.64% from 2024 to TTM, indicating improved cash generation. The Operating Cash Flow to Net Income Ratio is 1.20 TTM, which is a healthy indicator of cash generation relative to net earnings. The Free Cash Flow to Net Income Ratio is 1.13 TTM, demonstrating effective conversion of profits into cash.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
4.50B	4.48B	4.41B	3.81B	3.24B	3.25B
	Gross Profit
1.35B	1.34B	1.29B	1.11B	935.52M	937.74M
	EBIT
507.99M	495.82M	473.15M	357.86M	205.45M	222.77M
	EBITDA
542.95M	552.35M	520.39M	410.80M	309.84M	282.86M
	Net Income Common Stockholders
388.64M	385.76M	346.74M	257.41M	144.76M	24.04M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
352.84M	460.62M	344.04M	184.47M	257.75M	268.55M
	Total Assets
3.12B	2.95B	2.74B	2.45B	2.27B	2.28B
	Total Debt
572.30M	734.94M	622.10M	689.32M	828.38M	933.79M
	Net Debt
219.46M	274.33M	278.06M	504.85M	570.63M	665.24M
	Total Liabilities
1.29B	1.26B	1.28B	1.30B	1.34B	1.44B
	Stockholders Equity
1.83B	1.69B	1.46B	1.15B	932.55M	843.54M
Cash Flow		Free Cash Flow
438.77M	346.53M	317.49M	169.45M	225.84M	276.60M
	Operating Cash Flow
464.57M	371.39M	343.97M	187.57M	241.70M	296.71M
	Investing Cash Flow
-347.71M	-95.41M	-60.83M	-35.66M	-44.93M	-55.40M
	Financing Cash Flow
-146.40M	-156.47M	-126.89M	-223.03M	-213.04M	-78.24M

Applied Industrial Technologies Technical Analysis

Technical Analysis Sentiment

Negative

Last Price225.66

Price Trends

50DMA

226.54

Negative

100DMA

235.41

Negative

200DMA

237.07

Negative

Market Momentum

MACD

0.52

Positive

RSI

45.99

Neutral

STOCH

47.53

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AIT, the sentiment is Negative. The current price of 225.66 is below the 20-day moving average (MA) of 228.86, below the 50-day MA of 226.54, and below the 200-day MA of 237.07, indicating a bearish trend. The MACD of 0.52 indicates Positive momentum. The RSI at 45.99 is Neutral, neither overbought nor oversold. The STOCH value of 47.53 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AIT.

Applied Industrial Technologies Risk Analysis

Applied Industrial Technologies disclosed 19 risk factors in its most recent earnings report. Applied Industrial Technologies reported the most risks in the "Ability to Sell" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Applied Industrial Technologies Peers Comparison

Overall Rating

UnderperformOutperform

Sector (66)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DXPE	77 Outperform	$1.26B	16.40	19.45%	―	11.94%	34.08%
WCC	73 Outperform	$8.67B	13.44	14.38%	1.03%	-1.80%	9.55%
AIT	71 Outperform	$8.77B	22.63	22.23%	0.80%	0.50%	4.48%
MSM	69 Neutral	$4.57B	21.33	15.53%	4.15%	-5.71%	-31.93%
Sector *	66 Neutral	$4.51B	12.22	5.40%	3.63%	4.14%	-12.01%
DSGR	63 Neutral	$1.30B	1,724.84	0.18%	―	13.91%	―
TITN	52 Neutral	$463.54M	11.08	-9.38%	―	-5.32%	-163.42%

* Industrials Sector Average

Performance Comparison

AIT

Applied Industrial Technologies

225.66

41.83

22.75%

DXPE

DXP Enterprises

76.60

29.98

64.31%

DSGR

Distribution Solutions Group

26.75

-3.91

-12.75%

MSM

MSC Industrial

81.01

5.60

7.43%

TITN

Titan Machinery

19.32

2.97

18.17%

WCC

Wesco International

173.27

9.56

5.84%

Applied Industrial Technologies Corporate Events

M&A Transactions

Applied Industrial Technologies Completes Acquisition of Hydradyne

Positive

Jan 2, 2025

Applied Industrial Technologies announced the completion of its acquisition of Hydradyne, LLC, a provider of fluid power solutions, enhancing its distribution position in the U.S. The acquisition is expected to contribute significantly to Applied’s sales and EBITDA, with anticipated growth and operational momentum, and will be accretive to EPS within the first year.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.