Applied Industrial Technologies reports Q2 adjusted EPS $2.24, consensus $2.11

Reports Q2 revenue $1.1B, consensus $1.06B. CEO Neil Schrimsher commented, “I’m encouraged by our Q2 results considering normalization of industrywide end-market activity. Organic sales exceeded our expectations and held steady relative to prior-year levels, despite facing our most difficult comparison of the year, and slower technology sector activity as noted last quarter. We also sustained gross margin and EBITDA margin expansion during the quarter, reflecting normalizing LIFO expense, operational execution, and cost control. Additionally, we generated record Q2 cash flow that further expands our capacity to accelerate growth investments and other capital deployment opportunities going forward…As we enter the second half of fiscal 2024, we are on course for delivering our financial commitments while making solid progress toward our intermediate objectives of $5.5B in sales and 13% EBITDA margins. Near term, we expect underlying industrial activity to remain muted as end markets continue to recalibrate around normalizing supply chains and higher interest rates. This is partially reflected in January sales trending down by an estimated low single-digit percent on an organic basis over prior-year levels, albeit against a difficult low-20% growth comparison last January. That said, we remain constructive moving forward given the potential for reaccelerating sales and earnings growth from easing prior-year comparisons and abating technology sector headwinds, as well as sustained benefits from our internal initiatives…We are well positioned within this backdrop given our multi-faceted strategy focused on enhancing and leveraging our core service center operations, while expanding across higher-engineered solutions. We believe this strategy and our balance sheet capacity support significant value creation long term.”