Applied Industrial Down to Strong Sell

Zacks

Zacks Investment Research downgraded Applied Industrial Technologies, Inc. (AIT) to a Zacks Rank #5 (Strong Sell) on Nov 19, 2013.

Why the Downgrade?

Applied Industrial Technologies reported a disappointing result for the fiscal first quarter 2014 (ended Sep 30, 2013) on Oct 30. Shares of the company since the earnings release have fallen 4.1%. A brief of the quarter’s result is provided below:

Earnings per share came in at 63 cents, down 10% from the year-ago earnings of 70 cents. As compared with the Zacks Consensus Estimate of 71 cents, earnings fell short by 11.3%. Revenue in the quarter decreased 0.9% year over year due primarily to weak industrial demand. Volume was weak in the quarter.

Cost of sales was down 2.3% while operating expenses increased by 8.4%. Operating margin weakened to 6.5% versus 7.3% in the year-ago quarter.

For fiscal 2014, management of Applied Industrial Technologies has revised down its revenue and earnings guidance. Sales are now anticipated to be within a $2.43-$2.49 billion range versus the $2.56-$2.61 billion range expected earlier, while earnings per share are expected to be within a $2.65-$2.95 range, versus $2.90-$3.15 expected earlier.

Weak results and guidance for the year have led to a downward revision in earnings estimates for Applied Industrial Technologies. In the last 30 days, the Zacks Consensus Estimate has gone down by 8.9% to $2.76 for fiscal 2014 and has declined 7.5% to $3.21 for fiscal 2015.

We also have an Earnings ESP of -1.67% for the fiscal second quarter of 2014 and -0.62% for fiscal year 2015.

Other Stocks to Consider

Applied Industrial is a $2.0 billion company, operating in the industrial equipment wholesale industry. Howver, stocks to watch out for in the industry are Xylem Inc. (XYL) with Zacks Rank #1 (Strong Buy). Of two others, Middleby Corp. (MIDD) and Graham Corp. (GHM), each come with a Zacks Rank #2 (Buy).

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