Q4 2026 Applied Industrial Technologies Inc Earnings Call Transcript
Key Points
- Record fourth quarter sales and earnings exceeded expectations, with organic sales growth of 10%, the strongest in over three years.
- EBITDA margins expanded by over 60 basis points to 13.1%, with EBITDA growing 16% and EPS up 13% year-over-year.
- Engineered Solutions segment delivered 13% organic sales growth, led by automation with over 20% growth, the strongest in four years.
- Service Center segment saw organic sales growth accelerate to 8%, with 27 of top 30 industry verticals up year-over-year in the US.
- Strong free cash flow of $461 million for fiscal 2026, with net working capital as a percent of sales at a six-year low.
- Increased intermediate financial targets to $7 billion sales and 14% EBITDA margin, reflecting confidence in growth potential.
- Positive momentum continues into fiscal 2027 with organic sales up approximately 7% quarter-to-date and strong order intake in July.
- LIFO expense headwinds negatively impacted gross margins by 26 basis points and EBITDA growth by 2.3 percentage points in the quarter.
- Flow control operations saw muted sales growth due to softer MRO activity in process end markets like chemicals and refining.
- Fiscal 2027 guidance assumes more modest growth in the second half due to difficult comparisons and uncertainty from geopolitical and trade policy dynamics.
- Higher LIFO expense is expected in fiscal 2027, with guidance assuming $24 million to $28 million versus $21.5 million in fiscal 2026.
- Free cash flow is expected to potentially trend lower in fiscal 2027 due to greater working capital investment to support growth.
- Interest expense guidance is higher due to the roll-off of an interest rate swap and continued capital deployment, impacting EPS.
- End market demand remains mixed with declines in chemicals, lumber and wood, and transportation sectors.
Welcome to the fiscal 2026 fourth quarter earnings call for Applied Industrial Technologies. My name is Trevor, and I'll be your moderator for today's call. (Operator Instructions). Please note that this conference is being recorded.
I will now turn the call over to Ryan Cieslak, Vice President of Investor Relations and Treasury. Ryan, you may begin.
Okay. Thanks, Trevor, and good morning to everyone on the call. This morning, we issued our earnings release and supplemental investor deck detailing our fourth quarter results. Both of these documents are available in the Investor Relations section of applied.com. Before we begin, just a reminder, we'll discuss our business outlook and make forward-looking statements. All forward-looking statements are based on current expectations subject to certain risks and uncertainties, including those detailed in our SEC filings.
Actual results may differ materially from those expressed in the forward-looking
| Access to All Earning Calls and Stock Analysis | |
| 30-Year Financial on one screen | |
| All-in-one Stock Screener with unlimited filters | |
| Customizable Stock Dashboard | |
| Real Time Insider Trading Transactions | |
| 8,000+ Institutional investors’ 13F holdings | |
| Powerful Excel Add-in and Google sheets Add-on | |
| All data downloadable | |
| Quick customer support | |
| And much more... |
Trustpilot
We'd love to learn more about your experiences on GuruFocus.com and how we can improve!
Take Survey
