Applied Industrial Technologies, Inc. AIT is currently basking in the glow of robust performance in its end markets, strategic acquisitions, and investor-friendly strategies. Delving deeper into the underlying factors, let’s explore why this Zacks Rank #2 (Buy) company shines as an attractive investment option in the present climate.

Fueling Growth

Firm Foundations: Applied Industrial is riding high on strong demand across various sectors including food and beverage, lumber and wood, mining, pulp and paper, energy, utilities, and refining. Notably, the Service Center Based Distribution arm is experiencing upliftment from escalating sales to major national accounts and aftermarket fluid power sales. Furthermore, the company is reaping the rewards of technological advancements in its sales processes, propelling revenues up by 3.4% in the second quarter of fiscal 2024 (ending December 31, 2023). Projections for total sales growth of 1-3% year over year in fiscal 2024 are currently on the horizon.

Strategic Expansions: Applied Industrial’s consistent efforts to enhance its portfolio and seize new business opportunities through acquisitions have paid off. The additions of Bearing Distributors and Cangro in September 2023 have significantly bolstered the company’s presence in key regions like the US Southeast and upper Northeast. The acquisition of Advanced Motion Systems Inc. (AMS) in April 2023 not only extended its footprint in the upper Northeast US but also solidified relationships with key suppliers. Moreover, the takeover of Automation, Inc. in November 2022 expanded the company’s reach across diverse sectors and territories, enriching its suite of value-added services and cross-selling activities.

Rewarding Shareholders: Apart from its operational success, Applied Industrial is committed to enhancing shareholder value through a combination of dividends and share repurchases. In the first half of fiscal 2024, the company returned $27.2 million to shareholders in dividends, marking a 3.4% increase from the previous year. Furthermore, an uptick in the quarterly dividend rate by 5.7% in January 2024 showcases management’s confidence in the company’s trajectory. In fiscal 2023 alone, AIT distributed dividends worth $53.4 million, reflecting a 3.2% increase year over year. Notably, the initiation of a share buyback program in August 2022 was well received, aiming to repurchase up to 1.5 million common shares.

Moreover, with Zacks revising AIT’s fiscal 2024 earnings estimate upwards by 1.7% in the last 60 days, the momentum seems promising. AIT’s stock performance has also been impressive, delivering a robust 32.8% gain over the past year, outstripping the industry’s 23.7% surge.

In addition to Applied Industrial, investors may also want to consider other top-rated companies within the Industrial Products sector:

Atmus Filtration Technologies Inc. ATMU, currently holding a Zacks Rank of 2, has consistently delivered an average earnings surprise of 20.3% in the trailing four quarters. With earnings estimates up by 2% for 2024 over the past two months, ATMU has gained 5.3% in stock value over the last year.

AZZ Inc. AZZ, sporting a Zacks Rank of 2, boasts an impressive average earnings surprise of 37.5% in the last four quarters. With estimates for fiscal 2024 earnings up by 5.4% recently, AZZ’s stock has soared by 79.6% in the past year.

Brady Corporation BRC is another Zacks Rank 2 stock, having posted a consistent earnings surprise of 6.3% over the last four quarters. While fiscal 2024 earnings estimates have remained steady in the past 60 days, Brady’s stock has appreciated by 5.8% over the past year.