Applied Industrial Technologies, Inc.

What they do

Applied distributes more than 9.4 million SKUs focused on industrial bearings, power transmission, fluid power components and systems, specialty flow control, and advanced factory automation, plus general maintenance products. It serves MRO and OEM customers through approximately 580 facilities, including service centers, fluid power and flow control operations, repair shops, and distribution centers. Operations are conducted primarily in North America, as well as Australia, New Zealand, and Singapore, with about 6,900 employee associates. The company reports two segments: Service Center and Engineered Solutions.

Revenue drivers

• Service Center segment — Distributes MRO bearings, power transmission, and general maintenance products through local service centers; in the fiscal 2026 fourth quarter, Service Center organic sales rose 7.9% year over year, with management citing elevated technical MRO spending.
• Engineered Solutions segment — Provides engineered fluid power, flow control, and advanced factory automation components and systems; in the fiscal 2026 fourth quarter, Engineered Solutions organic sales rose 12.9% year over year, and management noted positive order momentum tied to engineering and application expertise.
• Acquisitions — Acquired businesses added $142.2 million, or 3.1 percentage points, to fiscal 2026 sales, and management says it maintains an active M&A pipeline.
• Foreign currency translation — Favorable currency translation added $15.9 million, or 0.3 percentage points, to fiscal 2026 sales.

Recent performance

Fiscal 2026 net sales were $5.0 billion, up 8.8% from the prior year, including 3.1 points from acquisitions and 0.3 points from foreign currency, with organic growth of 5.4%. The fiscal 2026 fourth quarter set record levels for sales, EBITDA, and EPS: sales of $1.4 billion rose 10.4% year over year (up 9.7% organic), net income was $118.6 million, or $3.17 per diluted share, and EBITDA was $177.6 million. Full-year net income was $414.5 million, or $10.95 per diluted share, up 8.2% year over year, with full-year EBITDA of $618.2 million. Full-year results included $21.5 million of pre-tax LIFO expense, or $0.43 per share after tax, versus $7.7 million in the prior year. In the March 2026 quarter, net sales were $1,251.5 million and net income was $99.8 million, or $2.65 per diluted share.

Strategy

Management describes fiscal 2026 as a pivotal year and says it is pursuing a strategy built on differentiated technical positions, sales initiatives, and an active acquisition pipeline. In August 2026, the company raised its intermediate financial targets to $7 billion of sales and 14% EBITDA margins, and said it would continue investing in growth. Fiscal 2027 guidance does not assume contributions from future acquisitions or share buybacks.

Risks

• Customer production levels — The company states its business depends heavily on customer operating levels, and reductions can lead to pricing pressure, inventory management difficulty, forecasting challenges, and higher credit losses.
• Inflation and cost pressure — Fiscal 2026 results included $21.5 million of pre-tax LIFO expense versus $7.7 million a year earlier, and management cites ongoing inflationary headwinds for fiscal 2027 guidance.
• Acquisition dependence — Acquisitions contributed $142.2 million, or 3.1 percentage points, of fiscal 2026 sales growth, and the company says it maintains an active M&A pipeline without guaranteeing future deal contribution.
• Macro, trade, and geopolitical uncertainty — Management's fiscal 2027 guidance explicitly incorporates uncertainty tied to geopolitical events and trade policy dynamics.

Outlook

For fiscal 2027, Applied guides to total sales growth of 4.0% to 6.5% and EPS of $11.65 to $12.15, with EBITDA margins of 12.5% to 12.8%. Guidance excludes contributions from future acquisitions or share buybacks and assumes no deal or repurchase benefit. Management says early first-quarter fiscal 2027 organic sales are up an estimated 7% year over year to date, though it notes more difficult comparisons and macro uncertainty. The company has raised its intermediate targets to $7 billion of sales and 14% EBITDA margins.