Applied Industrial Technologies reports net sales increase 7.6%
Applied Industrial Technologies, a value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies, reported net sales of $1.3 billion for its fiscal 2027 first quarter ended September 30.
The sum represents a 7.6% increase year over year, 7.1% on an organic basis. Net income was $110.4 million, up 12.7% year over year, and operating income increased to $143.6 million, up 11.3%. EBITDA increased 9.6% year over year to $160.3 million, and operating cash was reported at $86.4 million, and free cash flow is $73.4 million.
The change in net sales includes a 0.3% increase from acquisitions and a 0.2% benefit from foreign currency translation. Excluding these factors, sales increased 7.1% on an organic basis reflecting a 14.1% increase in the Engineered Solutions segment and a 3.5% increase in the Service Center segment.
President & Chief Executive Officer Neil A. Schrimsher said, “We had an encouraging start to fiscal 2027. First quarter EPS grew 13% year over year reflecting a favorable demand environment and solid margin performance. Sales growth was led by our Engineered Solutions segment, where our leading engineering capabilities and market positioning drove strong mid-teens organic sales growth, as well as ongoing positive order momentum. Service Center segment sales growth strengthened through the quarter, with positive trends continuing into October. In addition, we continue to manage broader inflationary pressures very well through ongoing gross margin initiatives, cost control, and channel execution. Combined with favorable mix, EBITDA margins expanded over the prior year and achieved the high-end of our first quarter guidance.
“Following first quarter results, we are reiterating fiscal 2027 sales and EBITDA margin guidance established in mid-August, Schrimsher added. "Sales trends are tracking in line with our expectations year to date and remain positive into early F2Q27, with organic sales month to date in October up approximately 10% year over year. While mindful of inflationary headwinds and macro uncertainty, we remain positively biased considering favorable market conditions and order trends, as well as various company-specific opportunities that should provide ongoing benefits moving forward. Combined with our leading technical industry position and balance sheet capacity, we are in a favorable position to deliver strong performance in fiscal 2027 and meaningful value creation long term.”
Fiscal 2027 Guidance
The company is modestly increasing fiscal 2027 EPS guidance to a range of $11.70 to $12.20 (prior $11.65 to $12.15) to reflect a slightly lower diluted share count assumption following first quarter share repurchases. The company is maintaining guidance for sales of up 4.0% to 6.5%, as well as EBITDA margins of 12.5% to 12.8%. Guidance continues to incorporate macro uncertainty tied to ongoing geopolitical events and trade policy dynamics, as well as broader inflationary headwinds and growth investments. Guidance does not assume contribution from future acquisitions or share buybacks.
Board of Directors Transition
Applied Industrial also announced today that Peter C. Wallace, chairman, retired from the board as of the company’s annual meeting held on October 20. The board has selected Joe A. Raver to succeed Wallace as its next independent chairman. Raver joined the board of directors in 2017.
“On behalf of the board of directors and the company, we thank Pete for his outstanding leadership and dedication to Applied throughout his 21 years of service on the board, including 12 years as chairman," said Schrimsher. "We are grateful for his many contributions and the steady guidance provided during his tenure, which helped shape the company’s progress and position for continued success in the years ahead. We wish him well going forward.
“Having served on our board for nearly a decade," Schrimsher continued, "Joe has a deep understanding of our business and strategy that provides a seamless transition as our next chairman.” His track record of strategic leadership, strong business acumen, and operational excellence throughout his executive career serving industrial markets has brought valuable direction and insight since joining our Board. I look forward to continuing to work alongside him and our fellow Board members as we further position Applied for sustainable growth and long-term value creation.”
INDUSTRIAL SUPPLY MAGAZINE
The September/October issue of Industrial Supply magazine features an in-depth cover story about Rotator Products. Plus, we're featuring articles by contributing writers Dr. Bharani Nagarathnam and Frank Hurtte, as well as interviews with numerous product and distribution industry experts.
