Fluid Power Specialist - MRO

Applied posts strong end to FY25 as organic growth accelerates. Applied ended fiscal 2026 with its strongest organic growth in more than three years and raised its intermediate targets to $7 billion in sales and a 14% EBITDA margin. Fluid power, power transmission and automation products distributor Applied Industrial Technologies reported its 2026 fiscal fourth quarter and full-year financial results on Aug. 13, showing a sharp acceleration in organic growth to close its fiscal year. 4Q results. Cleveland-based Applied posted total 4Q sales of $1.353 billion, up 10.4% year-over-year. Acquisitions contributed 30 basis points to the increase, while foreign currency added another 40 bps. Excluding those factors, organic sales jumped 9.7% year-over-year, including a 12.9% increase in the company's Engineered Solutions segment and a 7.9% gain in Service Center. The overall organic gain accelerated considerably from 6.0% in 3Q, 2.2% in 2Q and 3.0% in 1Q. It also represented a major swing from a year earlier, when Applied's 4Q25 organic sales increased just 0.2% following declines in each of the first three quarters of fiscal 2025. "We had a strong finish to fiscal 2026 with fourth quarter sales, EBITDA, and EPS achieving record quarterly levels and exceeding our expectations," Applied President and CEO Neil Schrimsher said in the company's financial release. "Organic sales growth of 10% was the strongest in more than three years with trends strengthening across both segments." Schrimsher added that Applied's growth momentum reflects its technical position and ongoing sales initiatives alongside an increasingly favorable end-market backdrop. AIT's 4Q gross margin was 30.4%, down about 20 bps year-over-year. EBITDA of $177.6 million jumped 16.1% from $153 million a year earlier, while EBITDA margin expanded more than 60 bps to 13.1%. Net profit of $118.6 million increased 10.0% year-over-year, while diluted EPS of $3.17 increased 13.2%. The quarter included $6.4 million of pre-tax LIFO expense, up from $2.9 million a year earlier. Full-Year results. For its full-year financials, Applied reported total sales of $4.967 billion, up 8.8% year-over-year, while sales increased 5.4% on an organic basis. That compared with fiscal 2025 sales growth of 1.9% and a 2.3% organic decline. Applied's full-year net profit of $414.5 million increased 5.5% from $393 million in 2025, while diluted EPS increased 8.2% to $10.95. EBITDA of $618.2 million increased 10.0% from $562 million a year earlier. The company generated $484 million of operating cash flow during fiscal 2026 and spent $317 million on share repurchases, more than double the $153 million spent in fiscal 2025. 2027 outlook. Applied issued its initial fiscal 2027 outlook calling for total sales growth of 4.0%-6.5%, EBITDA margin of 12.5%-12.8% and diluted EPS of $11.65-$12.15. The sales outlook follows Applied's 8.8% growth in fiscal 2026 and compares with its initial fiscal 2026 guidance issued a year ago that called for 4%-7% total sales growth and 1%-4% organic growth. Applied said its positive sales momentum has carried into the new fiscal year, with organic sales up an estimated 7% year-over-year so far in 1Q27. Schrimsher said the company continues to benefit from elevated technical MRO spending and internal sales initiatives within its Service Center segment, while Engineered Solutions order momentum remains positive. Applied also raised its intermediate financial objectives, now targeting $7 billion in annual sales and a 14% EBITDA margin. The company expects to reach those targets over the next five years, depending on macroeconomic conditions, M&A activity and progress on internal initiatives. The $7 billion sales target would represent an increase of about 41% from Applied's fiscal 2026 sales level. Recommended Reading

Applied Industrial Technologies reported 10% organic sales growth in Q4 2026, its strongest performance in over three years. The Engineered Solutions segment led with 13% organic growth, driven by a 20% surge in automation as customers increased adoption of robotics and vision systems. The Service Center segment grew 8%, with 27 of the top 30 industry verticals showing year-over-year gains. Technology now represents over 15% of Engineered Solutions, benefiting from semiconductor and data centre infrastructure demand. For fiscal 2027, management raised five-year targets to $7 billion in sales and 14% EBITDA margin. Capital allocation will prioritise mergers and acquisitions, with nearly $2 billion in balance sheet capacity. However, LIFO expense is expected to reach $24 million to $28 million in fiscal 2027, whilst interest expense will rise following the expiration of a favourable rate swap.

Applied Industrial Technologies reported fourth-quarter earnings of $3.17 per share, beating analyst estimates of $2.92. Revenue rose 10.4% year-over-year to $1.4 billion, surpassing the expected $1.29 billion. Shares gained 4% in premarket trading. Organic sales grew 9.7%, the strongest growth in over three years. The Engineered Solutions segment led with 12.9% organic growth, whilst Service Centre posted 7.9% growth. Net income increased 13.2% to $118.6 million, and EBITDA climbed 16.1% to $177.6 million. For fiscal 2027, the industrial products distributor forecasts earnings between $11.65 and $12.15 per share, with the midpoint below current analyst consensus. Management cited macroeconomic uncertainty related to geopolitical developments and trade policy.