Applied Industrial (AIT) Q3 Earnings & Sales Beat, Up Y/Y

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

Over the last one month, shares of this Zacks Rank #2 (Buy) stock yielded a return of 9.43%, outperforming 5.10% growth recorded the Zacks categorized Machinery-General Industrial industry.

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

Earnings and Earnings

Quarterly adjusted earnings came in at 75 cents per share, handily beating the Zacks Consensus Estimate of 62 cents. The company had reported a loss of $1.14 per share in the year-ago quarter.

Net sales during the quarter came in at $679.3 million, up 7.3% year over year. Organic revenue growth during the quarter was 6.8% year over year.

The top line also comfortably surpassed the Zacks Consensus Estimate of $636 million.

The company noted that sturdy revenue performance during the quarter was driven by acquisition benefits, favorable foreign currency translation impact and stronger sales volume.

Costs and Margins

Cost of sales in the reported quarter was $488.5 million, up 6.6% year over year. Selling, general and administrative expenses (including depreciation) were $145.3 million compared to $143 million recorded in the year-ago period.

Operating income in first-quarter 2017 was $45.5 million, as against the operating loss of $33 million recorded in the prior-year quarter.

Gross margin during the quarter was 28.1%, up 50 basis points year over year.

Balance Sheet & Cash Flow

Exiting the fiscal third quarter, Applied Industrial Technologies had cash and cash equivalents of $67.3 million compared with $59.9 million recorded at the end of fiscal 2016. The company's long-term debt was $317.4 million, down 2.2% from fiscal 2016 end.

For the first nine months of fiscal 2017, the company generated net cash of $78.5 million from its operating activities compared to $91.3 million cash generated in the year-earlier period.

In the first nine months of fiscal 2017, Applied Industrial Technologies purchased property worth $11.8 million compared with $9.4 million property purchased at the end third-quarter fiscal 2016.

Cash used for dividend payment totaled $33.2 million, while roughly $2.8 million was used for repurchasing 45,000 shares in open market.

Applied Industrial Technologies' board of directors approved a quarterly cash dividend of 29 cents per share. The dividend would be paid on May 31 to shareholders of record as on May 15.


Applied Industrial Technologies anticipates earnings within the range of 68-78 cents per share in fourth-quarter fiscal 2017. The company projects year-over-year revenue growth in the range of 6-8% in the next quarter.

Based on the current optimistic market trends, the company raised its fiscal 2017 earnings guidance to the $2.74-$2.84 per share range, as against the prior projection of $2.50-$2.60 per share.

Other Stocks to Consider

Some other stocks worth considering in the industry are listed below:

Caterpillar Inc. CAT has a positive average earnings surprise of 40.25% for the trailing four quarters and boasts a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

A. O. Smith Corporation AOS , which currently carries a Zacks Rank #2, generated an average earnings surprise of 5.26% over the last four quarters.

Avery Dennison Corporation AVY holds a Zacks Rank #2 and has an average earnings surprise of 5.53% for the past 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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