Applied Industrial Q2 Earnings Surpass Estimates, Revenues Miss

Applied Industrial Technologies, Inc. AIT reported second-quarter fiscal 2026 (ended Dec. 31, 2025) earnings of $2.51 per share, which surpassed the Zacks Consensus Estimate of $2.48. The bottom line increased 4.6% year over year.

Net revenues of $1.16 billion missed the consensus estimate of $1.17 billion. However, the top line increased 8.4% year over year. Acquisitions boosted the top line by 6% while foreign-currency translation had a favorable impact of 0.2%. Organic sales increased 2.2% year over year.

Segmental Discussion

The Service Center-Based Distribution segment’s revenues, which contributed 64.3% to net revenues, totaled $747.3 million. On a year-over-year basis, the segment’s revenues increased 3.2%. Our estimate for segmental revenues was $753.3 million.

While organic sales increased 2.9%, foreign currency translation positively impacted sales by 0.3%. Segmental revenues were aided by ongoing internal initiatives and strong demand for firming technical MRO.

The Engineered Solutions segment’s revenues (formerly the Fluid Power & Flow Control segment), which contributed 35.7% to net revenues, totaled $415.7 million. On a year-over-year basis, the segment’s revenues increased 19.1%. Our estimate for the segment’s revenues was $415.2 million.

Acquisitions boosted the top line by 18.6%. Organic sales increased 0.5% owing to price realization, and volume growth across industrial OEM and fluid power mobile customers.

Applied Industrial Technologies, Inc. Price, Consensus and EPS Surprise

Applied Industrial Technologies, Inc. price-consensus-eps-surprise-chart | Applied Industrial Technologies, Inc. Quote

AIT’s Margin Profile

In the quarter, Applied Industrial’s cost of sales was up 8.7% year over year to $809.7 million. Gross profit was $353.3 million, up 7.7% from the year-ago quarter. The gross margin inched down to 30.4% from 30.6% in the year-ago quarter. Selling, distribution and administrative expenses (including depreciation) increased 11.1% year over year to $230.1 million. EBITDA was $140.4 million, reflecting an increase of 3.9%.

AIT’s Balance Sheet & Cash Flow

In the first six months of fiscal 2026, Applied Industrial had cash and cash equivalents of $406 million compared with $388.4 million at the end of fiscal 2025. Long-term debt was $572.3 million, in line with the figure reported at the end of the prior fiscal year.

In the first six months, it generated net cash of $219 million from operating activities, indicating a decrease of 1.7% from the year-ago quarter. Capital expenditures totaled $13.6 million, up 27.1% year over year. Free cash flow decreased 3.2% year over year to $205.4 million.

In the first six months, AIT rewarded its shareholders with dividends of $34.7 million, up 21.8% year over year.

Dividend Update

Applied Industrial announced a hike in its dividend payout. The company increased its quarterly dividend by 11% to 51 cents per share (annually: $2.04). The new dividend will be paid out on Feb. 27, 2026, to shareholders of record as of Feb. 13. This marks the company’s 17th dividend hike since 2010.

Applied Industrial’s Guidance

For fiscal 2026 (ending June 2026), Applied Industrial anticipates adjusted earnings to be in the range of $10.45-$10.75 per share compared with $10.10-$10.85 predicted earlier. The company currently anticipates sales to increase in the range of 5.5-7% (up 2.5-4% on an organic basis) year over year. AIT expects the EBITDA margin to be in the range of 12.2-12.4%.

Zacks Rank and Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks from the same space are discussed below:

Flowserve Corporation FLS presently carries a Zacks Rank #2 (Buy). Flowserve’s earnings surpassed the consensus estimate thrice and missed once in the trailing four quarters. The average earnings surprise was 10.5%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2026 earnings has increased a penny.

Nordson Corporation NDSN currently carries a Zacks Rank of 2. Nordson’s earnings topped the consensus estimate thrice and missed once in the trailing four quarters. The average earnings surprise was 2.2%. In the past 60 days, the Zacks Consensus Estimate for Nordson’s fiscal 2026 earnings has increased 2.3%.

Parker-Hannifin Corporation PH presently carries a Zacks Rank of 2. Parker-Hannifin’s earnings surpassed the consensus estimate in each of the trailing four quarters. The average earnings surprise was 6.2%. In the past 60 days, the Zacks Consensus Estimate for Parker-Hannifin’s fiscal 2026 earnings has inched up 0.6%.

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This article originally published on Zacks Investment Research (zacks.com).

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