A month has gone by since the last earnings report for Applied Industrial Technologies, Inc. AIT. Shares have lost about 7.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Applied Industrial Q3 Earnings & Sales Beat, Up Y/Y
Applied Industrial Technologies reported better-than-expected results for third-quarter fiscal 2017 (ended Mar 31, 2017).
Quarterly adjusted earnings came in at $0.75 per share, handily beating the Zacks Consensus Estimate of $0.62. The company had reported a loss of $1.14 per share in the year-ago quarter.
Revenues: 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 and favorable foreign currency translation impact.
Cost & 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 the fiscal third quarter 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.
Segmental Performance: Net sales of The Service Center Based Distribution segment came in at roughly $554.9 million in the fiscal third quarter, up 5.9% year over year.
Revenues of The Fluid Power Businesses segment totaled $124.4 million, up 14% year over year.
Balance Sheet and 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.
In 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.
Outlook: Applied Industrial Technologies anticipates earnings within the range of $0.68–$0.78 per share for 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.