Applied Industrial Technologies, Inc. AIT announced encouraging results for the third quarter of fiscal 2022 (ended March 31, 2022). Sales exceeded the consensus estimate of 6.1%.
AIT’s adjusted earnings in the third fiscal quarter were $1.75 per share. Net income increased 27.7% from $1.37 a year ago.
In the reported quarter, Applied Industrial net sales were $980.7 million, up 16.6% year-over-year. Results benefited from 14.7% organic sales growth, 0.4% gains from acquisitions and a 1.6% increase from an additional day of sales. The increase was partially offset by a 0.1% unfavorable currency translation effect.
AIT’s revenue topped Zacks’ consensus estimate of $924 million.
Applied Industrial reports revenue in two market segments. A brief discussion of the quarterly results is provided below:
Service Center-Based Distribution revenue totaled $659 million, contributing 68% of net revenue in the quarter. Year-over-year, industry revenue increased 15.1%. Organic sales increased by 13.6% and an additional day of sales had a positive impact of 1.6%. Foreign currency translation had a negative impact of 0.2%. Revenue improvement was supported by break-fix MRO activity and a ramp-up of sales process initiatives.
The Fluid Power & Flow Control segment generated revenue of $321.7 million, contributing 32% to net revenue in the current quarter. That number was up 20% year-over-year on the back of 17.1% growth in organic sales and a 1.3% gain from acquisitions. An additional day of sales had a positive impact of 1.6%. Companies have thrived in technology, life science, off-road mobile, chemical and machinery markets.
Applied Industrial Technologies, Inc. Price, Consensus, and EPS Surprise
Applied Industrial Technologies, Inc. price-consensus-eps-surprise-chart | Applied Industrial Technologies, Inc. Quote
In the current quarter, Applied Industrial’s cost of sales increased 16.8% year-over-year to $693.3 million. Cost of sales represented 70.7% of net sales for the quarter. Gross profit for the quarter increased 16.2% year-over-year to $287.3 million, while gross margin decreased 10 basis points (bps) to 29 .4%.
Selling, distribution and administrative expenses (including amortization) increased 10.8% year over year to $191.5 million. This represented 19.5% of net sales in the reported quarter compared to 20.5% in the prior year quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to $108.6 million, reflecting growth of 25.1%. The margin increased by 80 basis points to 11.1%. Interest expense decreased 22.4% year over year to $5.9 million.
Balance sheet and cash flow
At the end of the third quarter of fiscal 2022, Applied Industrial had cash and cash equivalents of $188.1 million, up 21.5% from $154.8 million last year. trimester. Long-term debt was $681.2 million compared to $681.3 million in the prior quarter.
In the nine months of fiscal 2022, AIT repaid long-term debt of $550.4 million, compared to $82.1 million in the same period last year. During the same period, Applied Industrial generated $133.8 million in net cash from operating activities, reflecting a 34.2% decline from the prior year period level. Capital expenditures totaled $11.7 million, down 4.1% year over year. Free cash flow in the nine months of fiscal 2022 decreased 36.1% to $122.1 million.
In the nine months of fiscal 2022, Applied Industrial rewarded its shareholders with a dividend payout of $38.6 million. The amount represents a 2.1% year-over-year growth. Additionally, AIT repurchased shares worth $13.6 million during the same period. At the end of the third quarter of fiscal 2022, AIT must repurchase 317,960 shares.
For fiscal 2022 (ending June 2022), Applied Industrial is expected to benefit from effective inventory management, operational execution and margin initiatives. However, supply chain constraints and inflation issues are of concern.
Applied Industrial expects total revenue to grow 14.8-15.3% for fiscal year 2022 (higher than previously projected 11.5-12.5% growth). Organic sales growth for the full year is expected to be 13.6-14.1%, higher than the previously announced growth of 10.5-11.5%.
The EBITDA margin should be 10.5 to 10.6% (vs. 10.1 to 10.3% previously forecast). Earnings per share are estimated to be between $6.15 and $6.25 for fiscal 2022 (compared to $5.70 and $5.90 previously).
Zacks Ranking and Stocks to Consider
AIT currently carries a Zacks Rank #3 (Hold). Some top-ranked companies in the industrial products sector are featured below.
Roper Technologies, Inc. ROP currently has a Zacks Rank #2 (Buy). Its earnings surprise over the past four quarters averaged 2%. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Over the past 60 days, ROP revenue estimates have risen 0.8% for 2022. The stock has risen 10.6% over the past three months.
Donaldson Company, Inc. DCI currently carries a Zacks rank of 2. DCI delivered a four-quarter earnings surprise of 4.2%, on average.
Earnings estimates for DCI have risen 0.7% for fiscal year 2022 (ending July 2022) over the past 60 days. Its shares are down 8.8% over the past three months.
Ferguson plc FERG is currently ranked No. 2 to Zacks. FERG’s earnings surprise over the past four quarters averaged 14.2%.
Over the past 60 days, the stock’s earnings estimates have risen 7% for fiscal year 2022 (ending July 2022). The same has decreased by 19.7% in the last three months.
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