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Applied Industrial (AIT) Q1 Earnings & Sales Beat, Up Y/Y

Applied Industrial Technologies, Inc. AIT reported better-than-expected results for first-quarter fiscal 2018 (ended Sep 30, 2017).

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

Earnings and Revenues

Quarterly adjusted earnings came in at 86 cents per share, comfortably surpassing the Zacks Consensus Estimate of 76 cents. The bottom line also came ahead of the year-ago tally of 70 cents per share.

Net sales during the quarter came in at $680.7 million, beating the Zacks Consensus Estimate of $667 million. In addition, the top line came in higher than the year-ago tally of $624.8 million. The upside was primarily backed by stronger acquisition-related volume and favorable foreign currency-translation impact.  

The company’s quarterly organic sales improved 9.2% year over year.

 

Costs and Margins

Cost of sales in the reported quarter was $488.3 million, up 9.4% year over year. Gross profit margin came in at 28.3%, contracting 20 basis points (bps) year over year.

Selling, distribution and administrative expenses (including depreciation) totaled $140.6 million compared to $134.9 million incurred in the year-earlier period. Operating margin in the fiscal first quarter came in at 7.6%, expanding 70 bps year over year.

Balance Sheet & Cash Flow

Exiting the reported quarter, Applied Industrial had cash and cash equivalents of $77.8 million compared with $105.1 million recorded at the end of fiscal 2017. The company’s long-term debt was $285.2 million, down 0.6% witnessed at the end of fiscal 2017.

In the first three months of fiscal 2018, the company generated net cash of $9.4 million from its operating activities compared to $41.9 million cash generated in the year-earlier period.

In the fiscal first quarter, Applied Industrial purchased property worth $6.3 million compared with $3-million property purchased at the end of first-quarter fiscal 2017.

During the reported quarter, the company purchased 247,500 shares in the open market for $13.8 million. Also, its board of directors has approved the payment of a quarterly dividend of 29 cents per share. The dividend will be paid on Nov 30 to shareholders on record as of Nov 15, 2017.

Outlook

Applied Industrial anticipates to bolster its sales by 4-5% in fiscal 2018 (ending June 2018). The company narrowed its earnings guidance for full-year fiscal 2018. Adjusted earnings for fiscal 2018 are currently anticipated to lie in the range of $3.10-$3.20 per share, as against the prior outlook of $3.00-$3.20 per share.

Zacks Rank and Stocks to Consider

Applied Industrial currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are listed below:

Altra Industrial Motion Corp. AIMC has an average positive earnings surprise of 17.30% for the last four quarters and currently carries a Zacks Rank of #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Allegion PLC ALLE also holds a Zacks Rank of 2 and generated an average positive earnings surprise of 1.95% over the trailing four quarters.

A. O. Smith Corp. AOS, another Zacks Rank #2 stock, pulled off an average positive earnings surprise of 3.25% during the same time frame.

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