Applied Industrial Technologies (AIT) delivered strong second-quarter earnings, exceeding analysts’ expectations and demonstrating continued growth. The company reported earnings of $2.64 per share, surpassing the Zacks Consensus Estimate of $2.52 per share. This represents a 4.76% earnings surprise and follows a trend of consistently outperforming earnings estimates over the past four quarters. While the company outperformed on earnings, its revenue came in slightly below expectations. AIT reported revenue of $1.16 billion for the quarter, missing the Zacks Consensus Estimate by 2.20%. Despite missing revenue targets, the company’s ability to outperform on earnings demonstrates its strong operational performance and potential for continued growth.
The sustainability of AIT’s stock price in the coming months will depend heavily on management’s commentary on future earnings expectations during the upcoming earnings call. While the company has outperformed the market this year, investors are seeking clarity on the company’s path forward.
To gauge future performance, investors can look to the company’s earnings outlook, which includes current consensus earnings expectations and how those expectations have changed recently. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. This information can be gleaned from rating tools like the Zacks Rank, which has a proven track record of utilizing earnings estimate revisions to predict stock performance.
Ahead of the earnings release, the estimate revision trend for AIT was favorable, resulting in a Zacks Rank #2 (Buy). This suggests that the company’s stock is expected to outperform the market in the near future. Investors will be closely watching how estimates for the coming quarters and the current fiscal year evolve in the coming days. The current consensus EPS estimate is $2.35 on $1.12 billion in revenue for the coming quarter and $10.15 on $4.64 billion in revenue for the current fiscal year.
It is important to recognize that the outlook for the broader Manufacturing – General Industrial industry can significantly impact AIT’s stock performance. This industry currently ranks in the bottom 32% of the over 250 Zacks-ranked industries. Our research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Nordson (NDSN), another company in the same industry, is scheduled to report its earnings for the quarter ending July 2024 on August 21. This maker of adhesives and industrial coatings is expected to post quarterly earnings of $2.33 per share, representing a year-over-year change of -0.9%. Nordson’s revenues are expected to be $655.23 million, up 1% from the year-ago quarter.
Overall, AIT’s strong earnings performance, coupled with its positive Zacks Rank, signals a promising outlook for the company. However, investors should carefully consider the broader industry landscape and the company’s revenue performance before making any investment decisions.
