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Applied Industrial (AIT) Q2 Earnings Beat; Sales Down Y/Y

Industrial equipment wholesaler, Applied Industrial Technologies, Inc.AIT reported better-than-expected results for second-quarter fiscal 2017 (ended Dec 31, 2016).

The company is poised to grow on the back of greater operational efficacy, robust sales and strategic business expansion.

Over the last one month, shares of this Zacks Rank #2 (Buy) stock recorded a return of 6.00% - outperforming 3.27% provided by the Zacks categorized Machine-Tools & Related Products industry.

Revenues and Earnings

Quarterly earnings came in at 61 cents per share, in line with the year-ago tally. However, the bottom line surpassed the Zacks Consensus Estimate of 59 cents.

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Net sales during the quarter came in at $608.1 million, down 0.4% year over year. The company stated that the marginal decline was stemmed by unfavorable foreign currency translation and one less selling day.

However, the top line exceeded the Zacks Consensus Estimate of $595 million.

Margins

Applied Industrial Technologies' cost of sales was $435.7 million, marginally down by 0.3% year over year. Selling, distribution and administrative expenses (including depreciation) came in at $134.8 million, almost flat year over year. Operating margin contracted 10 basis points (bps) year over year to 6.2%.

Balance Sheet & Cash Flow

Exiting the fiscal second quarter, Applied Industrial Technologies had cash and cash equivalents of $62.9 million versus $59.7 million recorded at the end of fiscal 2016. The company's long-term debt was $323.9 million, marginally down by 0.2%, from fiscal 2016 end.

For the first half of fiscal 2017, the company generated net cash of $45.7 million from its operating activities compared to $33.8 million cash generated in the year-ago period.

In the first six months of fiscal 2017, Applied Industrial Technologies purchased property worth $6.7 million versus $5.7 million property purchased during the first half of fiscal 2016.

Cash used for dividend payment totaled $21.9 million; while roughly $2.4 million was used for repurchasing 52,500 shares in open market.

Applied Industrial Technologies' board of directors approved a hike of 1 cent per share or 3.6% in the company's quarterly dividend rate. The revised rate of 29 cents per share will be paid on Feb 28, 2017 to shareholders of record as on Feb 15.

Outlook

Applied Industrial Technologies believes that some headwinds prevailing in the market might hurt its results in the upcoming quarters. Based on the existing market conditions, the company projects earnings within the range of $2.50-$2.60 per share, for fiscal 2017.

Key Picks

Some other favorably placed stocks from the same space are listed below:

Apogee Enterprises, Inc. APOG has an average earnings surprise of 13.24% for the last four quarters and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

ABB Ltd. ABB presently flaunts a Zacks Rank #1 and has an average earnings surprise of 23.50% for the trailing four quarters.

Altra Industrial Motion Corp. AIMC also boasts a Zacks Rank #1 and has an average earnings surprise of 8.06% for the past four quarters.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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