Core Insights - AIT Worldwide Logistics has formed a partnership with Greenbriar Equity Group to support continuity and accelerate the next phase of the company's growth plans [1] Company Summary - The partnership aims to enhance AIT Worldwide Logistics' operational capabilities and strategic initiatives [1] - This collaboration is expected to facilitate the company's expansion and development in the logistics sector [1]

Core Insights - Applied Industrial Technologies, Inc. (NYSE:AIT) is identified as a mid-cap stock to buy by top investors, despite a recent price target reduction by KeyBanc from $310 to $300 while maintaining an Overweight rating [1][4] Financial Performance - The company reported Q2 revenues of $1.16 billion, reflecting an 8.4% increase year-over-year, driven by organic growth of 2.2%, acquisitions contributing 6%, and currency effects adding 0.2% [3] - Net income for the quarter was $95.3 million, resulting in earnings per share of $2.51 [3] Market Reactions - KeyBanc noted that higher LIFO expenses and volatile demand trends in December were significant factors influencing market reactions to the earnings announcement [4] - The firm indicated that buy-side expectations were likely elevated prior to the quarterly results [4] Company Overview - Applied Industrial Technologies, Inc. operates as a value-added distributor and technical solutions provider, specializing in industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies [4]

Core Insights - Applied Industrial Technologies (AIT) reported total revenue of $1.16 billion for the quarter ending December 2025, reflecting an 8.4% increase from the same quarter last year [4] International Revenue Trends - Canada generated $74.53 million in revenue, accounting for 6.4% of total revenue, which was a decrease of 1.33% from the projected $75.53 million [5] - Other International markets contributed $64.45 million, representing 5.5% of total revenue, falling short of the consensus estimate of $66.1 million by 2.5% [6] - For the upcoming fiscal quarter, analysts expect AIT to achieve revenues of $1.23 billion, a 5% increase year-over-year, with Canada contributing 6.2% ($76.49 million) and Other International contributing 5.5% ($67.62 million) [7] - The total revenue forecast for the entire year is $4.85 billion, indicating a 6.4% improvement from the previous year, with Canada expected to contribute 6.3% ($306.14 million) and Other International 5.6% ($271.21 million) [8] Market Context - The reliance on international markets presents both opportunities and challenges for AIT, making the analysis of international revenue trends crucial for forecasting the company's future outlook [9] - Wall Street analysts are closely monitoring these trends due to the increasing interdependencies and geopolitical disputes affecting global markets [10]

Core Insights - Applied Industrial Technologies, Inc. (AIT) reported Q2 fiscal 2026 earnings of $2.51 per share, exceeding the Zacks Consensus Estimate of $2.48, marking a 4.6% year-over-year increase [1][9] - Net revenues reached $1.16 billion, slightly missing the consensus estimate of $1.17 billion, but reflecting an 8.4% year-over-year growth [2][9] Revenue Breakdown - The Service Center-Based Distribution segment generated revenues of $747.3 million, accounting for 64.3% of total revenues, with a year-over-year increase of 3.2% [3] - The Engineered Solutions segment, contributing 35.7% to net revenues, reported revenues of $415.7 million, up 19.1% year-over-year, driven by acquisitions and pricing gains [4] Margin and Cost Analysis - AIT's cost of sales increased by 8.7% year-over-year to $809.7 million, while gross profit rose 7.7% to $353.3 million, resulting in a slight decrease in gross margin to 30.4% [5] - Selling, distribution, and administrative expenses increased by 11.1% year-over-year to $230.1 million, with EBITDA rising 3.9% to $140.4 million [5] Balance Sheet and Cash Flow - As of the first six months of fiscal 2026, AIT had cash and cash equivalents of $406 million, up from $388.4 million at the end of fiscal 2025, with long-term debt remaining stable at $572.3 million [6] - The company generated net cash of $219 million from operating activities, a decrease of 1.7% year-over-year, while capital expenditures rose 27.1% to $13.6 million [7] Dividend and Shareholder Returns - AIT announced an 11% increase in its quarterly dividend to 51 cents per share, marking the 17th dividend hike since 2010 [8][9] Future Guidance - For fiscal 2026, AIT anticipates adjusted earnings in the range of $10.45-$10.75 per share and expects sales growth of 5.5-7%, with an organic growth forecast of 2.5-4% [10]

Financial Performance - Net sales for the three months ended December 31, 2025, reached $1,163,023, an increase from $1,073,001 in the same period of 2024, representing an 8.4% growth[11] - Gross profit for the six months ended December 31, 2025, was $714,763, compared to $653,132 for the same period in 2024, reflecting a 9.4% increase[11] - Net income for the three months ended December 31, 2025, was $95,349, up from $93,290 in 2024, indicating a 2.2% increase[11] - The company reported a diluted net income per share of $2.51 for the three months ended December 31, 2025, compared to $2.39 in 2024, marking a 5.0% increase[11] - For the six months ended December 31, 2025, total net sales were $2,362,546, an increase from $2,171,945 in 2024, representing a growth of 8.8%[39] - Net income for the six months ended December 31, 2025, was $196,156, compared to $185,353 for the same period in 2024, representing a growth of 5.0%[11] Assets and Liabilities - Total assets as of December 31, 2025, were $3,159,322, a slight decrease from $3,175,544 as of June 30, 2025[16] - The total current liabilities decreased to $475,482 as of December 31, 2025, from $526,151 as of June 30, 2025, indicating a reduction of 9.6%[16] - The company has a total debt of $572,300 as of December 31, 2025, which includes a revolving credit facility of $384,000 and a trade receivable securitization facility of $188,300[62] - Total shareholders' equity increased to $1,874,408,000 as of December 31, 2025, up from $1,883,755,000 at the end of the previous quarter[22] Cash Flow and Dividends - Cash and cash equivalents increased to $405,986 as of December 31, 2025, from $388,417 at the end of June 2025, showing a growth of 4.1%[16] - The company paid dividends totaling $34,723 during the six months ended December 31, 2025, compared to $28,469 in the same period of 2024, representing a 22.0% increase[19] - Net cash provided by operating activities for the six months ended December 31, 2025, was $218,976, slightly down from $222,884 in 2024[19] Segment Performance - The Service Center segment focuses on maintenance and repair products, while the Engineered Solutions segment specializes in hydraulic and pneumatic technologies[31] - The Service Center segment generated net sales of $1,529.8 million for the six months ended December 31, 2025, compared to $1,473.6 million in the prior year, an increase of 3.8%[85] - The Engineered Solutions segment reported net sales of $832.7 million for the six months ended December 31, 2025, up from $698.4 million in the prior year, representing a 19.2% increase[85] Acquisitions - The company acquired Thompson Industrial Supply for $9.0 million on January 17, 2026, enhancing its Service Center segment[45] - Hydradyne, acquired on December 31, 2024, for $282,136, is now part of the Engineered Solutions segment, expanding the company's fluid power offerings[46] - The acquisition of Hydradyne on December 31, 2024, resulted in net sales of $63,128 thousand and net income of $3,581 thousand for the three months ended December 31, 2025[49] Accounting and Compliance - The company is currently evaluating the impact of new accounting standards issued by the FASB on its financial statements[32][34] - The company performed an annual goodwill impairment assessment on January 1, 2025, concluding that the fair value of all reporting units exceeded their carrying amounts, indicating no impairment[57] Operational Metrics - The number of employees was 6,794 at December 31, 2025, down from 6,916 at December 31, 2024[94] - The Manufacturing Capacity Utilization (MCU) index was 75.6 in December 2025, slightly down from 75.9 in September 2025, indicating a slight decline in industrial activity[94] Market and Revenue Insights - The United States contributed $1,024,050 to total net sales for the three months ended December 31, 2025, up from $929,549 in 2024, reflecting a growth of 10.2%[39] - Revenue from the United States for the six months ended December 31, 2025, was $2,080.5 million, up from $1,886.8 million in 2024, representing a growth of 10.3%[39] Financial Ratios and Expenses - Gross profit margin was 30.4% for the quarter, slightly down from 30.6% in the prior year, impacted by a $6.3 million increase in LIFO expense[103] - Selling, distribution, and administrative (SD&A) expenses rose by $22.9 million or 11.1%, accounting for 19.8% of sales compared to 19.3% in the prior year[104] - The effective income tax rate decreased to 22.3% from 23.9% due to the reversal of a tax valuation allowance related to Mexico[109]

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Core Insights - The company reported a gross margin of 30.4%, a decrease of 19 basis points from the previous year's 30.6%, primarily due to higher LIFO expenses and product inflation [1] - Organic sales in January were trending up by a mid-single-digit percentage year over year, indicating positive booking momentum [2] - CEO noted that organic growth was modestly below the prior quarter's 3%, with December sales rates notably below normal seasonal patterns, attributed to seasonal factors [3] Financial Performance - Consolidated sales increased by 8.4% year over year, with a 6-point contribution from acquisitions and a 20-basis-point benefit from foreign currency translation; organic sales rose by 2.2% [4] - Earnings per share (EPS) was reported at $2.51, an increase from $2.39, with the company raising its full-year EPS guidance to $10.45–$10.75 [6][8] - Excluding LIFO, gross margin improved to 31%, up 34 basis points year over year, attributed to effective cost management and favorable product mix [7] Segment Performance - In the Service Center segment, organic sales grew by 2.9% year over year, primarily driven by price increases, while U.S. operations saw growth of over 4% [9] - Engineered Solutions segment reported a 19.1% increase in sales year over year, largely due to acquisitions, with organic sales rising by 0.5% [10][11] Cash Flow and Capital Allocation - Operating cash flow was $99.7 million, with free cash flow at $93.4 million, representing a 98% conversion relative to net income [12] - The company announced an 11% increase in its quarterly dividend and repurchased over 346,000 shares for $90 million during the quarter [13] Acquisitions and Strategic Outlook - The acquisition of Thompson Industrial Supply is expected to add approximately $20 million in annual sales and enhance the company's Service Center capabilities [14] - The company continues to evaluate M&A opportunities to expand its technical engineered solutions and optimize local coverage [15] Updated Guidance - The company updated its fiscal 2026 guidance, projecting EPS of $10.45 to $10.75 and sales growth of 5.5% to 7%, with an expected increase in LIFO expenses [16][17] - Management anticipates about 4% organic sales growth in the second half, with third-quarter gross margins expected to decline into the low 30% range [18]

Financial Data and Key Metrics Changes - Consolidated sales increased by 8.4% year-over-year, with acquisitions contributing 6 percentage points to growth and foreign currency translation providing a positive 20 basis point impact [22] - Organic sales growth was reported at 2.2%, slightly below the previous quarter's 3% [5][22] - Reported EBITDA increased by 3.9% year-over-year, resulting in EBITDA margins of 12.1%, down from 12.6% in the prior year [26][30] - Earnings per share (EPS) rose to $2.51, a 4.6% increase from $2.39 in the prior year [27] Business Line Data and Key Metrics Changes - Service Center segment sales increased by 2.9% year-over-year on an organic basis, primarily driven by price contributions [27] - Engineered Solutions segment sales rose by 19.1% year-over-year, with acquisitions contributing 18.6 points of growth; organic sales increased by 0.5% [29] - Automation orders increased by 20% year-over-year, indicating strong demand in this segment [16][70] Market Data and Key Metrics Changes - Year-over-year trends across the top 30 end markets showed 15 markets generating positive sales growth, up from 11 in the prior year [8] - U.S. service center sales were up over 4% year-over-year, reflecting growth across both national and local accounts [12][28] - Positive demand signals were noted in the semiconductor customer base, suggesting a multi-year upcycle for semi wafer fab equipment [15] Company Strategy and Development Direction - The company remains focused on capital deployment, including an 11% increase in quarterly dividends and over $140 million in share buybacks during the first half of fiscal 2026 [10][31] - The acquisition of Thompson Industrial Supply is aimed at enhancing the company's footprint in Southern California and expanding technical capabilities [11] - The company is optimistic about growth potential in the second half of fiscal 2026, driven by increased customer activity and technical MRO needs [11][38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory entering the second half of fiscal 2026, despite mixed end-market conditions [11][36] - There is an expectation of ongoing variability in monthly sales growth due to macroeconomic uncertainties [33] - Management highlighted the potential for margin expansion as capital spending broadens across customer verticals [38] Other Important Information - LIFO expense was recognized at approximately $7 million, significantly higher than the prior year's $1 million, impacting gross margins [9][23] - Cash generated from operating activities was $99.7 million, with free cash flow totaling $93.4 million, representing a conversion of 98% relative to net income [30] Q&A Session Summary Question: Clarification on Engineered Solutions orders growth - Management confirmed that the 10% increase in orders was on an organic basis, with a book-to-bill ratio above 1 for three of the last four quarters [44][45] Question: Insights on fluid power comparisons and end demand trends - Management noted that destocking has been worked through, and performance in mobile off-highway fluid power is encouraging due to increased industrial activity [47][48] Question: January sales trends and potential impacts from December - Management indicated that January sales trends are encouraging, with Engineered Solutions up high single digits, and acknowledged potential benefits from December's lower activity [49][51] Question: SD&A growth relative to revenue growth - Management discussed expectations for SD&A growth to align more closely with revenue growth in the upcoming quarters, influenced by various factors including merit increases and prior year comparisons [56][60] Question: Capital allocation priorities - Management stated that organic growth investments take priority, followed by M&A, dividend increases, and opportunistic share repurchases, with ample access to capital [62][64] Question: Margin guidance and LIFO impacts - Management acknowledged LIFO as a headwind but highlighted potential benefits from improved sales mix and ongoing pricing actions [94][96]

Financial Data and Key Metrics Changes - Consolidated sales increased by 8.4% year-over-year, with acquisitions contributing 6 percentage points to growth and foreign currency translation providing a positive 20 basis point impact [22] - Organic sales growth was reported at 2.2%, with product pricing contributing approximately 250 basis points to year-over-year sales growth [22][23] - Reported earnings per share (EPS) was $2.51, up 4.6% from the prior year EPS of $2.39 [27] Business Line Data and Key Metrics Changes - Service Center segment sales increased by 2.9% year-over-year on an organic basis, primarily driven by price contributions, while volumes remained relatively unchanged [27][28] - Engineered Solutions segment sales increased by 19.1% year-over-year, with acquisitions contributing 18.6 points of growth; organic sales increased by 0.5% [29] Market Data and Key Metrics Changes - Year-over-year trends across the top 30 end markets showed 15 markets generating positive sales growth, up from 11 in the prior year [8] - U.S. service center sales were up over 4% year-over-year, reflecting growth across both national and local accounts [12][28] Company Strategy and Development Direction - The company remains focused on capital deployment, including an 11% increase in quarterly dividends and over $140 million in share buybacks during the first half of fiscal 2026 [10][31] - The company is actively evaluating M&A opportunities to enhance its technical engineered solutions position and optimize local market coverage [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed a constructive outlook for growth potential entering the second half of fiscal 2026, citing emerging growth catalysts and positive customer sentiment [11][36] - The company anticipates ongoing macro and policy uncertainty will influence customer spending behavior and shipment activity in the near term [33] Other Important Information - LIFO expense was recognized at approximately $7 million, significantly above the expected range and prior year levels, impacting gross margins [9][23] - Cash generated from operating activities was $99.7 million, with free cash flow totaling $93.4 million, representing a conversion of 98% relative to net income [30] Q&A Session Summary Question: Clarification on Engineered Solutions orders growth - Management confirmed that Engineered Solutions orders were up over 10% on an organic basis, with a book-to-bill ratio above 1 for three of the last four quarters [43][45] Question: Insights on fluid power comparisons and end demand trends - Management noted that destocking has been worked through, and performance in mobile off-highway fluid power is encouraging due to increased industrial activity [46][48] Question: January sales trends and impact of December pause - Management indicated that January sales trends are encouraging, with Engineered Solutions up high single digits, and acknowledged potential benefits from the December pause [49][51] Question: SD&A growth relative to revenue growth - Management discussed expectations for SD&A growth to align more closely with revenue growth in the upcoming quarters, influenced by various factors including merit increases and prior year provisioning [56][60] Question: Capital allocation priorities - Management outlined that organic growth investments take priority, followed by M&A, dividend increases, and opportunistic share repurchases, with ample access to capital [62][64] Question: Automation orders growth drivers - Management highlighted that both pent-up needs and new projects driven by onshoring are contributing to the growth in automation orders [70][72] Question: Pricing contributions and LIFO expense assumptions - Management expects pricing contributions to remain stable, with potential moderation in the fourth quarter due to overlapping prior increases and LIFO dynamics [78][82]

Core Insights - Applied Industrial Technologies (AIT) reported revenue of $1.16 billion for the quarter ended December 2025, reflecting an 8.4% increase year-over-year, although it was a slight miss of 0.78% compared to the Zacks Consensus Estimate of $1.17 billion [1] - The earnings per share (EPS) for the quarter was $2.51, up from $2.39 in the same quarter last year, surpassing the consensus estimate of $2.48 by 1.41% [1] Financial Performance Metrics - Net Sales for Engineered Solutions reached $415.7 million, a 19.1% increase year-over-year, but slightly below the average estimate of $416.22 million from two analysts [4] - Net Sales for Service Center Based Distribution was $747.32 million, representing a 3.3% increase year-over-year, but also below the estimated $754.86 million [4] - Operating income for Engineered Solutions was reported at $47.88 million, compared to the average estimate of $51.79 million from two analysts [4] - Operating income for Service Center Based Distribution was $94.27 million, below the estimated $99.25 million from two analysts [4] Stock Performance - Shares of Applied Industrial Technologies have returned +6.9% over the past month, outperforming the Zacks S&P 500 composite, which saw a +0.4% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]