Leveraged Beneficiary of a Recovery in Industrial & Energy Markets
- Given the leverage inherent in a distributor, our estimates could prove conservative if the industrial economy and energy markets (7% of revenue) continue to improve.
- The shares are now off 17% from their April 2017 high of $69, despite EPS projected up at least 11% in FY18 (June) to a record $3.15.
- Applied offers a 2.0% yield on a dividend raised for eight consecutive years on a 37% payout ratio estimated for FY18.
Applied Industrial Technologies is a distributor of bearings, power transmission products, fluid power components and systems, specialty flow control solutions, and other industrial supplies, operating in North America, Australia, New Zealand, and Singapore. In addition, the company provides engineering, design, and systems integration for industrial, fluid power, and flow control applications, as well as customized mechanical, fabricated rubber, fluid power, and flow control shop services. The company has two reportable segments: service center based distribution; and fluid power and flow control.
Great Lakes Review is located in Cleveland, Ohio, was founded in 1981 and became a division of Wellington Shields & Co. LLC in 2011. Great Lakes Review is a research boutique focused on the fundamentally-oriented investor seeking companies that dominate their respective specialty niche regardless of industry. The objective is to make money for the long-term by gradually accumulating a diversified portfolio from a universe of no more than 30 companies. Although short-term-oriented accounts will be alerted to trading opportunities, aggressive sell recommendations are triggered only by a deterioration in long-term fundamentals, not by short-term blips or investor fancy. Coverage of those names that lose their earnings momentum or earnings predictability may be dropped and replaced with more vital candidates.
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