|
Related Topics
|
Category: Stock Market and Applied Industrial
Date: 23 September 2019 Stock Price: $54.74 We take a look at the 4th quarter earnings release of their 2019 fiscal year of Applied Industrial Technologies a leading distributor of bearings and power transmission products
|
About Applied Industrial Technologies
Founded in 1923, Applied Industrial Technologies is a leading distributor of bearings, power transmission products, engineered fluid power components and systems, specialty flow control solutions, and other industrial supplies, serving MRO and OEM customers in virtually every industry. In addition, Applied provides engineering, design and systems integration for industrial and fluid power applications, as well as customized mechanical, fabricated rubber, fluid power, and flow control shop services. Applied also offers storeroom services and inventory management solutions that provide added value to its customers
Overview of Applied Industrial Technology's latest earnings report
The numbers we are interested in (for the quarter):
- Net sales: $882.743 million (down from $897.721 million from the same quarter of the previous year)
- Revenue decreased by 1.68% over the last 12 months
- Cost of Sales: $625.392 million (up from $634.034 million for the same quarter of the previous year)
- Total operating expenses decreased by -1.36% over the last 12 months
- Net earnings: $39.801 million (down from $40.362 million for the same quarter of the previous year)
- Diluted income per share: $1.02 (down from $1.02 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 38.993 million (up from 273.925 million for the same quarter of the previous year)
- Cash and cash equivalents: $108.209 million
- Cash and cash equivalents per share: $2.77
- Cash and cash equivalents makes up 5.1% of Applied Industrial's market capital
- Cash and cash equivalents makes up 4.64% of Applied Industrial's total assets
- Inventories : $447.555 million
- Inventories makes up 19.19% of Applied Industrial's total assets
- Accounts receivable: $540.902 million
- Accounts receivable makes up 23.19% of Applied Industrial's total assets
- Stockholders equity of Applied Industrial: $897.034 million
- Stockholders equity per share: $23
- Applied industrial Technology is trading at 2.38 times its stockholders equity per share. It is trading within the expected range of between 2 to 4 times stockholders equity most firms trade at.
- Cash generated from operations (for full year): $143.993 million
- Cash generated from operations per share (for full year): $3.71
Applied Industrial's management commentary on the results and earnings guidance
CLEVELAND--(BUSINESS WIRE)--Aug. 14, 2019-- Applied Industrial Technologies (NYSE: AIT) today reported results for its fourth quarter and fiscal 2019 year ended June 30, 2019
Commenting on the results, Applied’s President & Chief Executive Officer Neil A. Schrimsher said, “Despite slower end-market demand and ongoing inflationary headwinds, we ended fiscal 2019 on an encouraging note with fourth quarter margins, EBITDA, and free cash meeting or exceeding our expectations. This demonstrates our ability to adapt, execute, and generate cash in any demand environment, as well as benefit from various self-help initiatives. Consistent with recent macroeconomic industrial reports, we saw a slowing in demand across industrial, process, and energy end markets during the quarter. Combined with ongoing fluid power technology market headwinds and difficult comparisons, our sales declined organically. While the industrial backdrop is proving more challenging near-term, we see sustained momentum from our differentiated industry position and operational strategy, as highlighted by our collective fiscal 2019 performance including consistent margin improvement, and respective EBITDA and free cash growth of 18% and 30%.”
Outlook
Today the Company also provided its initial outlook for fiscal 2020. For the full year, the Company is forecasting an EPS range of $4.20 to $4.50 on a change in sales of down 2% to up 2%, including down 5% to down 1% on an organic daily basis. In addition, the Company is forecasting free cash of $200 million to $220 million, or up 30% at the mid-point.
Mr. Schrimsher concluded, “We are mindful of broader industrial cycle uncertainty entering fiscal 2020, which is reflected in our guidance. While reinforcing our cost discipline and cash generation potential near-term, we remain focused on our long-term growth strategy and believe our products and solutions are increasingly critical given an aging and tighter industrial labor force, more sophisticated production equipment and processes, a focus on plant floor optimization, and compliance and regulatory requirements. Combined with sustained margin opportunities and our leading technical and service-oriented position in engineered solutions and flow control markets, we are favorably positioned as the cycle evolves near-term. Over the intermediate to long-term we expect accelerating growth potential via secular market tailwinds and share gains given this industry position, as well as our recent expansion into automation solutions with the agreement to acquire Olympus Controls. This multi-faceted and technical-oriented growth strategy presents many new and relevant opportunities to drive shareholder value as we enter the next decade and approach the Company’s 100th year anniversary.”
The image below shows the revenues per product category of Applied Industrial Technology. A quarter of their revenues comes from power transmission related products sold.
Commenting on the results, Applied’s President & Chief Executive Officer Neil A. Schrimsher said, “Despite slower end-market demand and ongoing inflationary headwinds, we ended fiscal 2019 on an encouraging note with fourth quarter margins, EBITDA, and free cash meeting or exceeding our expectations. This demonstrates our ability to adapt, execute, and generate cash in any demand environment, as well as benefit from various self-help initiatives. Consistent with recent macroeconomic industrial reports, we saw a slowing in demand across industrial, process, and energy end markets during the quarter. Combined with ongoing fluid power technology market headwinds and difficult comparisons, our sales declined organically. While the industrial backdrop is proving more challenging near-term, we see sustained momentum from our differentiated industry position and operational strategy, as highlighted by our collective fiscal 2019 performance including consistent margin improvement, and respective EBITDA and free cash growth of 18% and 30%.”
Outlook
Today the Company also provided its initial outlook for fiscal 2020. For the full year, the Company is forecasting an EPS range of $4.20 to $4.50 on a change in sales of down 2% to up 2%, including down 5% to down 1% on an organic daily basis. In addition, the Company is forecasting free cash of $200 million to $220 million, or up 30% at the mid-point.
Mr. Schrimsher concluded, “We are mindful of broader industrial cycle uncertainty entering fiscal 2020, which is reflected in our guidance. While reinforcing our cost discipline and cash generation potential near-term, we remain focused on our long-term growth strategy and believe our products and solutions are increasingly critical given an aging and tighter industrial labor force, more sophisticated production equipment and processes, a focus on plant floor optimization, and compliance and regulatory requirements. Combined with sustained margin opportunities and our leading technical and service-oriented position in engineered solutions and flow control markets, we are favorably positioned as the cycle evolves near-term. Over the intermediate to long-term we expect accelerating growth potential via secular market tailwinds and share gains given this industry position, as well as our recent expansion into automation solutions with the agreement to acquire Olympus Controls. This multi-faceted and technical-oriented growth strategy presents many new and relevant opportunities to drive shareholder value as we enter the next decade and approach the Company’s 100th year anniversary.”
The image below shows the revenues per product category of Applied Industrial Technology. A quarter of their revenues comes from power transmission related products sold.
Applied Industrial Technology (NYSE: AIT) stock price history
The image below, obtained from Google, shows the stock price history of Applied Industrial Technology (NYSE: AIT) over the last 5 year. And it's been a good time for Applied Industrial Technology stockholders. 5 years ago the stock of Applied Industrial Technology was trading at $47 a stock, and its currently it's trading at $54.74. Thats s return of 122% offered over the last 5 years. The stock is also trading at a lot closer to its 52 week low of $49.45 than it is to its 52 week high of $82.35 which to us is a clear indication that the short term sentiment and momentum of the stock is overwhelmingly negative.
Applied Industrial Technology (NYSE: AIT) latest stock valuation
So based on the earnings report of Applied Industrial Technology (NYSE: AIT) and the latest earnings guidance provided what do we value Applied Industrial Technology (AIT) stock at? Based on their latest earnings and the outlook provided by the group our target (full value) price for Applied Industrial Technology at $67.20 a stock. We therefore believe the stock of Applied Industrial Technology s undervalued
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $67.20 Therefore we believe the a good entry point into the stock is below $60.50. We therefore rate Applied Industrial Technologies a buy.
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $67.20 Therefore we believe the a good entry point into the stock is below $60.50. We therefore rate Applied Industrial Technologies a buy.