Applied Industrial’s third quarter results came in above Wall Street’s expectations, supported by strong execution in its Service Center segment and continuing improvements in demand across key industrial markets. Management highlighted that the Service Center team achieved notable gains, leveraging sales growth into higher earnings through tight cost control and effective margin management. CEO Neil Schrimsher said, “Strengthening service center sales growth is an encouraging sign for both the segment as well as our broader operations,” referencing improved activity in areas such as machinery, metals, and food and beverage. Meanwhile, the Engineered Solutions segment sustained positive order momentum, even as some project conversions occurred later in the quarter.
Is now the time to buy AIT? Find out in our full research report (it’s free for active Edge members).
Applied Industrial (AIT) Q3 CY2025 Highlights:
- Revenue: $1.2 billion vs analyst estimates of $1.19 billion (9.2% year-on-year growth, 1.1% beat)
- EPS (GAAP): $2.63 vs analyst estimates of $2.48 (6.1% beat)
- Adjusted EBITDA: $146.3 million vs analyst estimates of $142.7 million (12.2% margin, 2.5% beat)
- EPS (GAAP) guidance for the full year is $10.48 at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 10.8%, in line with the same quarter last year
- Organic Revenue rose 2.9% year on year vs analyst estimates of 2.1% growth (76.3 basis point beat)
- Market Capitalization: $9.56 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Applied Industrial’s Q3 Earnings Call
- David Manthey (Baird): Asked about potential holiday shutdowns and how customer activity might affect the end-of-year quarter. CEO Neil Schrimsher noted it was too early for definitive trends, but anticipated a mix of project maintenance and some downtime among customers.
- Peter Costa (Mizuho): Questioned whether Engineered Solutions could outperform Service Center in the second half. Schrimsher indicated that backlog and project conversions should drive Engineered Solutions’ growth later in the year.
- Sabrina Abrams (Bank of America): Sought clarification on order conversion timing and whether delays were customer-driven. Schrimsher explained that project complexity and scheduling were the main factors, not widespread customer hesitation.
- Kenneth Newman (KeyBanc): Inquired about recent order trends and confidence in Engineered Solutions’ backlog conversion. Schrimsher expressed optimism, citing strong pipelines in data centers and life sciences, but acknowledged some softness in MRO business within flow control.
- Christopher Dankert (Loop Capital): Asked for detail on margin dynamics and Hydradyne synergies. CFO Dave Wells highlighted the sequential EBITDA growth at Hydradyne and noted benefits from AR provisioning and ongoing cost initiatives.
Catalysts in Upcoming Quarters
Over the coming quarters, our analyst team will be closely watching (1) the pace at which Engineered Solutions’ backlog converts to revenue, particularly in automation and data center applications; (2) the continued integration progress and synergy realization from the Hydradyne acquisition; and (3) management’s ability to navigate trade policy uncertainties and maintain pricing discipline. Execution on capital deployment—especially in M&A and organic automation investments—will also be key to tracking Applied Industrial’s performance trajectory.
Applied Industrial currently trades at $256.98, down from $260.13 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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