Applied Industrial Exhibits Strong Prospects Amid Persisting Headwinds

Applied Industrial Technologies, Inc. AIT is well-positioned for growth, supported by strong performance across its key served markets, including technology, food & beverage, pulp & paper, aggregates and transportation. Solid momentum in the technology-related fluid power end market is supporting the performance of the Engineered Solutions segment. Favorable order trends across automation, technology, mobile and industrial verticals also bode well. The segment’s revenues increased 13.5% year over year in the third quarter of fiscal 2025 (ended March 2025).

AIT remains focused on strengthening its competency through acquisitions. In the fiscal third quarter, buyouts had a positive impact of 6.6% on the company's sales. In May 2025, Applied Industrial acquired IRIS Factory Automation (“IRIS”) to strengthen its automation offerings. The acquired business has been integrated into the company’s Engineered Solutions segment. Applied Industrial’s acquisition of Hydradyne (in January 2025) bolsters its fluid power offerings. The acquisition enables the company to create cross-selling opportunities and expand its footprint in the Southeast U.S. region. Also, in May 2024, AIT acquired Grupo Kopar, which expanded its automation platform and extended its footprint into Mexico.

Applied Industrial is committed to rewarding its shareholders handsomely through dividend payments and share buybacks. In the first nine months of fiscal 2025, AIT paid out dividends worth $46.2 million, up 11.2% on a year-over-year basis. The company hiked its quarterly dividend rate by 24% in January 2025.

Also, in April 2025, AIT’s board of directors authorized a new share buyback program (replacing the August 2022 share buyback program) to repurchase up to 1.5 million shares of its common stock. As of March 31, 2025, the company was left with repurchasing 770,124 shares.

AIT’s Price Performance

In the past year, shares of this Zacks Rank #3 (Hold) company have gained 20.9% compared with the industry’s 4.2% growth.

Headwinds Plaguing AIT

Reduced maintenance, repair and operations (MRO) spending, lower capital maintenance projects and prolonged customer plant shutdowns are adversely impacting the performance of the Service Center Based Distribution segment. Lower local account sales across machinery, metals and utilities verticals also remain concerning. In the fiscal third quarter, the segment’s revenues decreased 3.5% on a year-over-year basis.

AIT has been experiencing rising expenses for a while. During the fiscal third quarter, Applied Industrial witnessed a 4.1% year-over-year increase in SG&A expenses (including depreciation) due to higher costs associated with acquired businesses. The SG&A expenses, as a percentage of total revenues, climbed 50 basis points to reach 19.4%.

Stocks to Consider

Some better-ranked companies are discussed below:

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The Zacks Consensus Estimate for GRC’s 2025 earnings has increased a penny in the past 60 days.

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

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