AIT

Find your next quality investment with Simply Wall St's easy and powerful screener, trusted by over 7 million individual investors worldwide. Applied Industrial Technologies (AIT) shares are drawing attention after the company reported fiscal 2026 results, issued fresh 2027 guidance, and outlined acquisition plans alongside a board reshuffle involving Pamela J. Tomczik and Peter C. Wallace. See our latest analysis for Applied Industrial Technologies. Applied Industrial Technologies shares have eased in recent weeks, with a 7 day share price return of 5.62% and a 30 day share price return of 1.57%. However, the year to date share price return of 31.58% and 5 year total shareholder return of 290.57% point to strong longer run momentum that recent earnings, guidance and M&A commentary are now helping to frame. If you are weighing AIT alongside other industrial and automation exposed companies, it can help to scan for complementary ideas in robotics and automation by checking the 37 robotics and automation stocks Applied Industrial Technologies now combines record earnings, fresh guidance and a busy M&A pipeline with a share price that has already moved sharply higher this year. Is that business strength still on offer at a reasonable valuation today? Applied Industrial Technologies closed at $341.62 compared to a narrative fair value of $400. That gap reflects a view that recent earnings, guidance and acquisition plans still leave upside if key assumptions play out. Read the complete narrative. Want to see what is baked into that $400 fair value for Applied Industrial Technologies? The narrative leans on steady revenue trends, firmer margins and a richer future earnings multiple. Curious which specific earnings and valuation assumptions bridge today’s price to that target? The full narrative lays out the numbers in detail. Result: Fair Value of $400 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, investors also need to weigh risks around ongoing weakness in key legacy markets and the company’s heavy reliance on acquisitions to support future growth. Find out about the key risks to this Applied Industrial Technologies narrative. The $400 fair value for Applied Industrial Technologies is grounded in earnings forecasts and a higher future P/E. Yet today the stock trades on a P/E of 30.2x versus a fair ratio of 21.8x, the US Trade Distributors industry at 26.3x, and peers at 19.1x. That richer multiple suggests less room for error if growth or margins fall short, so how comfortable are you with paying up for this story? See what the numbers say about this price — find out in our valuation breakdown. With sentiment on Applied Industrial Technologies split between opportunity and caution, it makes sense to review the details yourself and move quickly to shape your own view using the 2 key rewards and 1 important warning sign. If Applied Industrial Technologies has sharpened your focus, now is a great moment to broaden your watchlist with a few targeted stock ideas on Simply Wall Street. Target potential mispricings by scanning companies that appear attractively valued using the 48 high quality undervalued stocks. Prioritise resilience by searching for companies that combine financial strength with dependable balance sheets through the solid balance sheet and fundamentals stocks screener (50 results). Hunt for quieter opportunities by reviewing a screener containing 17 high quality undiscovered gems before the crowd turns its attention their way. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include AIT. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

On August 13, Applied Industrial Technologies (NYSE:AIT) held its fiscal fourth-quarter earnings call, and the numbers surprised even the company's own leadership. Organic sales grew 9.7%, the fastest pace in more than three years and a sharp jump from the 6% growth reported just one quarter earlier. For a distributor whose fortunes track the health of American manufacturing, that kind of acceleration is not a small thing, and it set up a call that ended with management raising its long-term ambitions rather than just its short-term guidance. The breadth of the improvement stood out as much as the headline number. Twenty of the company's top 30 end markets posted positive year-over-year sales growth in the quarter, up from 17 last quarter and just 15 a year earlier, with metals, technology, utilities and energy, machinery, rubber and plastics, and pulp and paper leading the way. Automation sales jumped more than 20% year-over-year, the strongest growth in over four years, as customers lean into robotics, machine vision, and what management called physical AI. The technology vertical now makes up more than 15% of the Engineered Solutions segment, with semiconductor demand and data center buildouts both contributing. The Service Center segment grew organic sales 8%, up from 4% last quarter, with 27 of 30 verticals positive. That segment has averaged 8% organic sales growth and 13% EBITDA growth over the past five years, a track record management pointed to as evidence the business is more durable than investors might assume. All of that flowed through to the bottom line. EBITDA margin expanded more than 60 basis points to above 13%, EBITDA grew 16%, and SG&A expense fell to 18.6% of sales. The company generated $461 million in free cash flow for the year, returned $317 million to shareholders through buybacks, raised its dividend 11%, and used the momentum to lift its five-year targets, pushing the sales objective to $7 billion from $5.5 billion and the EBITDA margin goal to 14% from 13%. The guidance Applied issued for fiscal 2027 tells a more cautious story than the quarter it just posted. Full-year sales growth guidance sits at just 4% to 6.5%, well below the 9.7% just delivered, with management citing tougher comparisons in the back half of the year and limited visibility into how trade policy and geopolitical dynamics evolve. Inside Engineered Solutions, flow control sales growth was muted in the quarter, weighed down by a difficult prior-year comparison and softer MRO activity across process end markets like chemicals and refining, both of which also declined outright for the year alongside lumber and wood and transportation. Margins carried their own drag too. Gross margin slipped 20 basis points as LIFO expense more than doubled to $6.4 million from $2.9 million a year earlier, and guidance assumes that pressure continues into fiscal 2027. Free cash flow is also expected to trend lower next year as the company invests more in working capital to support growth, a reminder that funding an acceleration costs money even when the demand backdrop cooperates. Hedge fund ownership rose from 44 to 46 funds, a modest sign of accumulating institutional interest heading into the print. Short interest sits at just 2.31% of float, indicating little organized skepticism toward the name. As of August 21, shares trade at 28.82 times forward earnings, a multiple that already bakes in a fair amount of the growth acceleration management just delivered and then guided more conservatively against. Applied enters fiscal 2027 with its strongest demand backdrop in years and newly raised five-year targets to match it, but its own guidance assumes that growth decelerates from here rather than continuing to build. For the bullish case to play out, automation and technology-driven demand need to keep broadening while flow control recovers alongside process end markets. For the more cautious case, watch whether LIFO costs and softer free cash flow eat into the margin gains investors just cheered, and whether trade policy uncertainty turns from a caveat into an actual headwind. While we acknowledge the potential of AIT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: 10 Best Future Stocks to Buy Under $10 and 12 Best Performing Semiconductor Stocks to Invest In. Disclosure: None. Follow Insider Monkey on Google News.

The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Applied Industrial (NYSE:AIT) and the rest of the engineered components and systems stocks fared in Q2. Engineered components and systems companies possess technical know-how in sometimes narrow areas such as metal forming or intelligent robotics. Lately, automation and connected equipment collecting analyzable data have been trending, creating new demand. On the other hand, like the broader industrials sector, engineered components and systems companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings. The 13 engineered components and systems stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 3.4% while next quarter’s revenue guidance was 1.6% above. Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 5.8% since the latest earnings results. Formerly called The Ohio Ball Bearing Company, Applied Industrial (NYSE:AIT) distributes industrial products–everything from power tools to industrial valves–and services to a wide variety of industries. Applied Industrial reported revenues of $1.35 billion, up 10.4% year on year. This print exceeded analysts’ expectations by 4.6%. Overall, it was an exceptional quarter for the company with a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ EBITDA estimates. Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 1.7% since reporting and currently trades at $346.23. Is now the time to buy Applied Industrial? Access our full analysis of the earnings results here, it’s free. Holding a Guinness World Record for creating the world's largest gasket, Enpro (NYSE:NPO) designs, manufactures, and sells products used for machinery in various industries. Enpro reported revenues of $338.8 million, up 17.6% year on year, outperforming analysts’ expectations by 4.7%. The business had an exceptional quarter with full-year EBITDA guidance exceeding analysts’ expectations. Although it had a fine quarter compared to its peers, the market seems unhappy with the results as the stock is down 4.4% since reporting. It currently trades at $319.57. Is now the time to buy Enpro? Access our full analysis of the earnings results here, it’s free. Founded by a steel salesman, Worthington (NYSE:WOR) specializes in steel processing, pressure cylinders, and engineered cabs for commercial markets. Worthington reported revenues of $371.5 million, up 16.9% year on year, falling short of analysts’ expectations by 4%. It was a disappointing quarter as it posted a significant miss of analysts’ EBITDA and EPS estimates. Worthington delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 2.3% since the results and currently trades at $57.37. Read our full analysis of Worthington’s results here. Based in Cleveland, Park-Ohio (NASDAQ:PKOH) provides supply chain management services, capital equipment, and manufactured components. Park-Ohio reported revenues of $440.1 million, up 10% year on year. This result surpassed analysts’ expectations by 3%. It was an exceptional quarter as it also put up a solid beat of analysts’ EBITDA estimates and full-year EPS guidance exceeding analysts’ expectations. The stock is up 11.1% since reporting and currently trades at $46.25. Read our full, actionable report on Park-Ohio here, it’s free. Originally founded solely on tool and die manufacturing, Mayville Engineering Company (NYSE:MEC) specializes in metal fabrication, tube bending, and welding to be used in various industries. Mayville Engineering reported revenues of $163 million, up 23.2% year on year. This number beat analysts’ expectations by 7.9%. Overall, it was an exceptional quarter as it also logged a beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates. Mayville Engineering achieved the highest full-year guidance raise among its peers. The stock is down 18.4% since reporting and currently trades at $22.62. Read our full, actionable report on Mayville Engineering here, it’s free. Over the past year, investors have been forced to repeatedly answer the same question: what is the market’s biggest risk? The answer has changed several times, and each shift has reshaped market leadership. Late in 2025 and early 2026, artificial intelligence became the market’s primary uncertainty. Investors questioned whether AI would erode software pricing power and weaken competitive moats as AI made it easier to replicate once-differentiated products. By the spring, technology took a back seat to geopolitics. The U.S. conflict with Iran briefly became the market’s dominant narrative, raising concerns about oil prices, inflation, and global growth. But as energy markets remained orderly and fears of a prolonged supply disruption faded, investors quickly turned their focus back to fundamentals. Want to invest in winners with rock-solid fundamentals? Check out our Strong Momentum Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

Applied Industrial delivered revenue and profit above Wall Street’s expectations in Q2, powered by robust organic growth and expanding momentum across both core business segments. Management pointed to accelerating demand in automation solutions and improved technical maintenance activity as primary contributors to the quarter’s outperformance, while also highlighting the benefits of ongoing internal sales initiatives. CEO Neil Schrimsher emphasized, “The stronger sales growth was volume driven, reflecting greater technical MRO and capital spending activity combined with ongoing benefits from our internal sales initiatives and industry position.” Is now the time to buy AIT? Find out in our full research report (it’s free). Revenue: $1.35 billion vs analyst estimates of $1.29 billion (10.4% year-on-year growth, 4.6% beat) EPS (GAAP): $3.17 vs analyst estimates of $2.92 (8.7% beat) Adjusted EBITDA: $177.6 million vs analyst estimates of $164.2 million (13.1% margin, 8.2% beat) EPS (GAAP) guidance for the upcoming financial year 2027 is $11.90 at the midpoint, beating analyst estimates by 0.9% Operating Margin: 11.8%, in line with the same quarter last year Organic Revenue rose 9.7% year on year (beat) Market Capitalization: $12.7 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is 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. Christopher Glynn (Oppenheimer & Co.): asked about the increase in capital expenditures and whether this reflects new growth opportunities. CFO David Wells explained the higher CapEx is for organic investments in automation and technology, with no large single projects but several efficiency and growth-focused initiatives. Glynn (Oppenheimer & Co.): also inquired about standout automation applications and cross-selling trends. CEO Neil Schrimsher cited strong momentum in robotics, vision, and digital solutions for data centers and packaging, as well as rising customer engagement in fluid power systems upgrades. Ken Newman (KenBanc Capital Markets): questioned the impact of the FCC ban on foreign robotics imports. Schrimsher responded that exposure is minimal and current automation projects and orders remain strong, with little disruption expected. Andrew Obin (Bank of America): requested details on daily sales trends and restocking. Wells reported steady 6-8% organic sales growth quarter-to-date, while Schrimsher noted that robust orders and backlog should support continued demand without significant inventory swings. Chris Stengert (Loop Capital): asked about order growth in Engineered Solutions and the outlook for cost optimization. Schrimsher described the order pipeline as robust, with some projects extending beyond a single quarter, and reaffirmed ongoing focus on technology-driven efficiency improvements. In the coming quarters, the StockStory team will be watching (1) the pace and sustainability of automation and engineered solutions order growth, (2) signs of recovery in process and flow control markets, particularly deferred maintenance and turnaround projects, and (3) execution of M&A to expand capabilities and margin profile. Progress in technology investment and measurable improvements in cross-selling will also be key indicators. Applied Industrial currently trades at $346.23, down from $352.29 just before the earnings. Is there an opportunity in the stock? The answer lies in our full research report (it’s free for active Edge members). ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively. Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Thursday, Aug. 13, 2026 at 10:00 a.m. ET Vice President of Investor Relations and Treasury - Ryan Dale Cieslak President and Chief Executive Officer - Neil A. Schrimsher Chief Financial Officer - David K. Wells Operator: Welcome to the Fiscal 26 Fourth Quarter Earnings Call for Applied Industrial Technologies. My name is Trevor, and I will be your moderator for today's call. At this time, all participants are in a listen-only mode. Peter, we will conduct a Q&A session. If you wish to ask a question at that time, please press star followed by the number 1 on your telephone keypad. Prior to asking a question, lift your handset to ensure the best audio quality. If at any time during the conference call, you need to reach an operator, please press star 0. Please note that this conference is being recorded. I will now turn the call over to Ryan Dale Cieslak, Vice President of Investor Relations and Treasury. Ryan, you may begin. Ryan Dale Cieslak: 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 will 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 statements. The company undertakes no obligation to update publicly or revise any forward-looking. In addition, we will use non GAAP financial measures during the conference call. Which are subject to the qualifications referenced in our SEC filings. Our speakers today include Neil A. Schrimsher, Applied President and Chief Executive Officer and David K. Wells, our Chief Financial Officer. With that, I will turn it over to Neil. Neil A. Schrimsher: Thanks, Ryan, and good morning, everyone. We appreciate you joining us. I will begin today with perspective and highlights on our results, including an update on industry conditions, and expectations going forward, as well as provide an overview of our new intermediate financial target. David will follow with more financial detail on the quarter's performance and provide additional color on our fiscal 2027 guidance. I will then close with some final thoughts. Overall, we reported a solid finish to fiscal 2026. With record fourth quarter sales and earnings that exceeded our expectations. The quarter was underscored by organic sales growth of 10%, was the strongest in more than 3 years, and a notable improvement from the 6% growth we reported last quarter. We levered the stronger growth very well, expanding EBITDA margins by more than 60 basis points to over 13% growing EBITDA by 16%, and EPS by 13% compared to the prior year. Which is inclusive of ongoing LIFO expense headwinds. In total, these are strong results to end a year that was both defining and pivotal on many fronts. Including showing strong evidence of our operating durability, as well as early signs of the significant growth potential taking shape across our business's ongoing execution. I want to thank our Applied team for their focus drove another year of exceeding our commitments, and creating meaningful value for our customers, suppliers, and all stakeholders. Further validating the power of our collective efforts, and differentiated industry position. Several key points to highlight in more detail. First, underlying demand improved across both segments during the quarter. Trends strengthened through the end of the quarter with organic sales increasing over 10% year over year in June despite more difficult comparisons. The stronger sales growth was volume driven, reflecting greater technical MRO and capital spending activity combined with ongoing benefits from our internal sales initiatives and industry position. Strengthening underlying demand was apparent in year over year trends across our top 30 end markets. where 20 generated positive sales growth compared to 17 last quarter, and 15 in the prior year quarter. Growth was strongest across metals, technology, utilities and energy, machinery, rubber and plastics, and pulp and paper. This was partially offset by declines primarily in chemicals, lumber and wood, and transportation. Sales growth during the quarter was led by our Engineered Solutions segment, which delivered 13% organic sales growth year over year. Up from 9% last quarter. During the quarter, we saw stronger demand across legacy, and emerging customer verticals. As well as solid backlog conversion. Segment order trends also remained positive during the quarter increasing by double digit percent year over year for the 3rd straight quarter. Sales growth in the quarter was strongest in automation where organic sales increased over 20% year-over-year. This was the strongest organic growth in over 4 years. Underscoring the solid demand developing for our automation solutions as the adoption of robotics, machine vision, and digital technologies ramps higher. with a more productive capital spending environment. Growth also strengthened across our industrial and mobile fluid power operations. Where sales increased by a high single digit percent over the prior year. Demand is improving across many of our legacy Fluid Power markets, including construction, metals and machinery. In addition, our engineering project funnel is expanding as OEM customers increasingly focus on upgrading Fluid Power systems, and integrate new advanced features into their mobile equipment. Our Fluid Power performance is also benefiting from Hydrodyne. Which as you recall, we acquired 18 months ago. We have made tremendous progress across our synergy work streams, and contribution from Hydrodyne improved throughout fiscal 2026. Of note, the second half of fiscal 2026, Hydrodyne's sales increased by double digit percent year over year. While their EBITDA margins improved over 200 basis points. In addition, segment performance during the quarter benefited from strong technology vertical contribution. Including favorable growth across the semiconductor space, as well as new business continuing to develop around data centers. As a reminder, our technology vertical represents over 15% of our Engineered Solutions segment today with related participation across all 3 areas of the segment. Including automation, fluid power, and flow control. Our service center segment also had a solid quarter. Organic sales growth of 8% accelerated from 4% last quarter with average daily sales up approximately 5% sequentially and ahead of normal seasonality for the 2nd straight quarter. Greater break fix and technical MRO activity continued to broaden throughout the quarter. Of note, 27 of our top 30 industry verticals were up year over year and our US service center network during the fourth quarter. With notable strength across metals, pulp and paper, rubber and plastics, and utilities and energy. Growth was strongest across national strategic accounts where sales continued to benefit from our internal initiatives and 1 Applied value proposition. We also saw demand strengthen across small and mid sized local accounts where sales increased by a high single digit percent year over year during the quarter. Providing further evidence of the recovery taking shape across the industrial sector. it is also worth noting the Service Center segment's performance throughout fiscal 2026. Despite more mixed end market demand to start the year, segment sales grew organically year over year every quarter in fiscal 2026. Total sales finished up nearly 6% while EBITDA grew 8% inclusive of greater LIFO expense. Looking at the segment's performance over the past 5 years, organic sales growth has averaged 8% while EBITDA growth has averaged 13%. Overall, this is notable performance that highlights a stronger and more durable growth profile that exists across our service center segment today reflecting benefits from internal initiatives as well as secular and structural tailwinds positively impacting our core market position. Overall, a solid quarter highlighting continued positive top line momentum building across Applied. At the same time, our team remains focused on driving stronger returns as this more favorable growth backdrop continues to develop. We saw solid evidence of this during the quarter, where we levered 10% sales growth into 16% EBITDA growth. Representing incremental margins of over 19% or more than 22% when excluding LIFO expense. We also had a strong quarter of free cash generation, which increased 16% over the prior year. Free cash totaled $461 million in fiscal 2026, which was down modestly over the prior year despite greater working capital requirements to support growth, in the back half of the year. Ongoing initiatives and system investments continue to optimize our working capital KPIs including areas of accounts receivable and inventory management. With net working capital as a percent of sales ending fiscal 2026 at a 6-year low. Moving forward, we remain well positioned to drive stronger earnings growth and solid cash generation. With ongoing support from our internal initiatives and mixed tailwinds. From a capital deployment standpoint, we had another productive year in fiscal 2026. Deploying approximately $425 million on share buybacks dividends CapEx, and M&A. Over the past 2 years, related capital deployment totaled just under $1 billion In fiscal 26, we were more active with share buybacks repurchasing a total of 1.2 million shares for $317 million We also increased our quarterly dividend by 11% and continue to invest in our technology platforms distribution centers, and growth capacity during the year. We expect to remain active with capital deployment in fiscal 2027 with nearly $2 billion of balance sheet capacity. As always, we will remain disciplined with a focus on deploying capital that enhances our scale, growth profile and competitive position going forward. M&A remains a top priority and we continue to actively evaluate various targets across both our segments. Lastly, I would like to take a moment to provide some initial thoughts on our fiscal 27 outlook, as well as our intermediate financial objectives. Which we increased this morning. Will provide greater detail on our guidance assumptions. But overall, we enter fiscal 2027 with solid growth potential and operational momentum developing across both our segments. Positive sales momentum has continued into the first quarter with organic sales to date up approximately 7% compared to prior year levels. In market demand in aggregate appears to be on solid footing with limited pockets of weakness or signs of slowing near term. Broader macro indicators, ISM, industrial production, and durable goods orders continue to trend favorably. In addition, following a more muted growth backdrop, in fiscal 2026, we expect potentially greater contribution from higher margin flow control sales. In fiscal 27 as MRO and project activity across process end markets improve following a greater level of deferred spending this past year. Particularly in chemicals and refining verticals. We remain mindful of the evolving geopolitical and trade policy uncertainty, both of which could impact the cadence and trajectory of end market growth depending on how things develop. We will also face more difficult comparisons, most notably in the second half of the year following our recent strong performance. These considerations are contemplated in our initial fiscal 2027 guidance. Beyond critical and core end market dynamics, we expect ongoing positive contribution from our internal sales initiatives, including greater cross selling momentum and benefits from sales productivity investments. We also expect structural and secular tailwinds to remain positive and potentially more impactful factors to our demand moving forward. Of note, our ongoing evolution has positioned Applied at the intersection of exciting and powerful growth trends tied to rising technical support at customer plants, industrial system upgrades, automation adoption, including physical AI integration, and the build out of critical infrastructure across both legacy and emerging customer verticals. Our related exposure to these trends is high. Given our industry position supporting US manufacturing, and deep technical knowledge of our customers' facilities, as well as greater scale we have today in areas of advanced automation, and fluid power. Further, our balance sheet and cash generation provide meaningful capacity further compound our growth through ongoing M&A. As I mentioned earlier, our pipeline remains active and we believe M&A contribution could be more meaningful to our sales growth through fiscal 2027 and beyond. As we further execute our strategy. The M&A backdrop is increasingly productive as targets face heightened competition required operational investments and extended ownership life cycles. Our acquisition track record including more than 18 transactions since 2018, combined with our leading technical solutions platform makes us a compelling home for the companies we are currently evaluating. So we see many catalysts and tailwinds supporting our ongoing growth across Applied, as we enter the next phase of our evolution. At the same time, we have great potential to further expand our EBITDA margin profile moving forward. Our business model provides inherent operating leverage and we continue to target mid to high teen incremental EBITDA margin at mid single digit organic sales growth. The ongoing expansion of our Engineered Solutions segment and local account growth across our service centers provide durable and structural mix tailwinds that should intensify in a more favorable demand environment. We also see opportunities to further optimize our productivity and operating leverage through ongoing technology investments, expanding our shared services model and leveraging AI. While ongoing synergy progress across recent acquisitions including Hydrodyne, provide further margin support. The opportunity ahead is exciting. and 1 that has been built through compounding years of executing our strategy, committing to continuous improvement, leveraging our differentiated industry position, and adhering to a disciplined approach to capital investment. From various organic investments, and positioning made across our core service center segment, to strategic moves into flow control and automation our strategy is driven intentional transformation across our business to serve customers more completely expand our market potential, and strengthen our overall value proposition. Our historical performance provides strong evidence of the power of our strategy and potential. In the past 5 years, we have grown sales by 9%, EBITDA by 14%, EPS by 18%, and free cash flow by 15% on a compounded annual basis. Over the same period, gross margins have expanded 120 basis points and EBITDA margins have expanded by over 260 basis points while our return on capital metrics have improved notably. Considering these dynamics, we believe now is the opportune time to update our intermediate financial targets. Including increasing our sales objective to $7 billion from $5.5 billion prior and increasing our EBITDA margin objective to 14% from 13% prior. We believe these objectives are well within the company's capability and can be achieved over the next 5 years depending on broader macro conditions, the cadence and scope of M&A, and other factors. Overall, our team is now engaged and ready to execute on these next milestones which we believe provides the framework for significant value creation for all stakeholders moving forward. At this time, I will turn it over to David for additional detail on our results. And outlook. David K. Wells: Thanks, Neil, and good morning to everyone joining today. Just as a reminder before I begin, as in prior quarters, we have posted a supplemental investor presentation to our investor site for your additional reference. We hope that you will find this to be a useful resource as we recap our most recent quarter performance and initial fiscal 2027 guidance. Turning now to our financial performance in the quarter, consolidated sales increased 10.4% over the prior year quarter. Acquisitions and foreign currency a modest tailwind in the period adding 40 basis points respectively, of growth. The number of selling days in the quarter was consistent year over year. Netting these factors, sales increased 9.7% on an organic basis. As it relates to pricing, we estimate the contribution of product pricing to year over year sales growth was approximately 250 basis points in the quarter, which was above our guidance of 200 basis points. Netting this impact, we estimate volumes grew approximately 7% over the prior year a nice acceleration from the March quarter volume growth of 3.5%. Moving to consolidated gross margin performance, as highlighted on Page 8 of the deck, gross margins of 30.4% was down 20 basis points compared to the prior year level. During the quarter, we recognized LIFO expense of $6.4 million compared to $2.9 million in the prior year quarter $5.6 million last quarter. On a net basis, this resulted in an unfavorable 26-basis-point year over year impact on gross margins. Excluding LIFO expense, gross margins were up modestly year over year reflecting ongoing progress with our internal margin initiatives as well as price and channel execution. As it relates to our operating cost, selling, distribution, and administrative expenses increased 5.1% compared to prior year levels. On an organic constant currency basis, SG&A expense was up 4.3% year over year. As a percentage of sales, SG&A expense improved 94 basis points year over year to 18.6% highlighting strong operating leverage in the quarter and a solid improvement from trends last quarter. Our teams continue to remain disciplined on spend, while also focusing on various efficiency initiatives tied to technology investments, shared services, and sales productivity tools. This helped offset continuing inflationary headwinds higher incentives, ongoing growth investment in the business during the quarter. Overall, stronger organic sales growth combined with steady gross margin performance, solid cost leverage, resulted in reported EBITDA increasing 16.1% over the prior year. This is inclusive of greater LIFO expense year over year which negatively impacted EBITDA growth by 2.3 percentage points compared to the prior year quarter. Reported EBITDA margin of 13.1% was up 64 basis points from the prior year level with year over year LIFO headwinds negatively impacting EBITDA margin by 26 basis points. EBITDA margins exceeded our fourth quarter guidance range of 12.6% to 12.8% primarily reflecting more favorable cost leverage and stronger sales growth in the quarter. Reported earnings per share of $3.17 increased 13.2% from prior year EPS of $2.80. On a year over year basis, EPS was impacted by a higher tax rate and net interest expense partially offset by a lower diluted share count. Turning now to our performance by business segment. As highlighted on Slides 9 and 10 of the presentation, sales in our Service Center segment increased 7.9% year over year an organic basis. This excludes 50 basis points of contribution from acquisitions and a positive 60-basis-point impact from foreign currency translation. Improved organic sales growth was primarily driven by stronger volume growth across our US service center operations reflecting more favorable end market demand and benefits from our internal sales initiatives and to a lesser extent improved volume growth across our international operations. Segment EBITDA increased 16.3% over the prior year while segment EBITDA margin of 14.5% expanded 91 basis points. This year over year improvement primarily reflects favorable operating leverage on stronger sales growth, combined with solid channel execution and cost control which more than offset ongoing inflationary headwinds including greater LIFO expense compared to the prior year level. Within our engineered solutions segment, sales increased 12.9% over the prior year quarter on an organic basis. The year over year increase was primarily driven by double digit growth across our automation and fluid power operations, reflecting solid backlog conversion improving end market demand, and positive technology vertical contribution. This was partially offset by muted sales growth across our flow control operations primarily reflecting a more difficult prior year comparison coupled with softer MRO activity across various process end markets during the quarter. Segment EBITDA increased 15.8% over the prior year or approximately 19% when excluding LIFO expense. In addition, segment EBITDA margin of 15.1% expanded 38 basis points from prior levels, inclusive of a 44-basis-point year over year LIFO headwind. The strong EBITDA growth and EBITDA margin performance in the quarter primarily reflects solid underlying incremental margins and more robust sales growth combined with ongoing cost accountability, partially offset by muted flow control sales growth in the quarter. Moving to our cash flow performance, Cash generated from operating activities during the fourth quarter, $165 million while free cash flow totaled $159.7 million, representing conversion of approximately 135% relative to net income. Compared to the prior year fourth quarter, free cash was up nearly 16% reflecting stronger earnings, and ongoing benefits from our working capital initiatives. From a balance sheet perspective, we ended June with approximately $127 million of cash on hand and net leverage at 0.2x EBITDA. Our current revolving credit agreement has approximately $826 million of available capacity and an additional $800 million accordion option. Combined with incremental capacity under our AR securitization facility, we have significant financial capacity to support our capital deployment initiatives moving forward, including accretive M&A, dividend growth, and share buybacks. During the fourth quarter, we repurchased over 265 thousand shares $81 million Turning now to our outlook. Which is detailed on Page 13 of the presentation, we are establishing full year fiscal 2027 guidance, including EPS in the range of $11.65 to $12.15 Based on sales growth, of 4% to 6.5% and EBITDA margins of 12.5% to 12.8%. Outlook takes into consideration ongoing economic uncertainty, tied to current geopolitical and trade policy dynamics, as well as lingering inflationary pressures. At the midpoint of guidance, we assume stronger organic sales growth in the first half of the year based on current underlying market conditions, followed by more modest growth rates in the back half of the year reflecting more difficult comparisons as well as more muted market growth assumptions pending greater clarity on how macro and trade policy dynamics develop later in the year. While we are positive on current demand conditions, and our market position, entering fiscal 27, we believe a prudent approach to our market growth rate assumptions remains warranted at this time considering the inherent risk and dynamic nature of current geopolitical and trade policy dynamics, which in totality, represent a still somewhat unprecedented operating backdrop. Guidance also assumes 150 to 200 basis points of year over year sales contribution from pricing. Guidance does not assume contribution from future acquisitions or share buybacks. In addition, based on quarter to date sales trends through mid August, and our near term outlook, we currently project fiscal first quarter organic sales to increase by 6% to 8% versus the prior year quarter. Our guidance also assumes fiscal first quarter EBITDA margins within the range of 12.3% to 12.4%. From a margin and cost perspective, guidance assumes ongoing inflationary pressures and growth investments as well as higher LIFO expense in fiscal 2 thousand 27 versus 2026. That said, we expect the year over year increase in LIFO expense to be more modest in fiscal 2 thousand 27 following the notable increase we saw in fiscal 2 thousand 26 combined with more balanced supplier price increases relative to last year. In addition, the midpoint of our full year guidance assumes incremental EBITDA margins that are within our targeted range of mid to high teens. Lastly, we expect free cash generation to remain strong in fiscal 2 thousand 27 but to potentially trend lower year over year, reflecting greater working capital investment to support our growth opportunities. In addition, we expect ongoing organic investment supporting our and technology investments with capital expenditures targeted in the $35 million to $40 million range for fiscal 2 thousand and 27. With that, I will now turn the call back over to Neil for some final comments. Neil A. Schrimsher: So as we begin fiscal 2 thousand 27, we are encouraged by the ongoing positive sales momentum. The recovery taking shape across the industrial sector, appears durable near term with customers operating at higher production levels and increasing capital spending in support of a growing manufacturing backdrop across North America. Including clear secular tailwinds gaining traction. Our initial guidance for fiscal 27 incorporates a steady and favorable growth backdrop in the first half of the year and a more prudent assumptions in the back half as we take into consideration the short cycle nature of our business more difficult comparisons, and limited visibility in how current trade policy and geopolitical dynamics might develop as the year progresses. That said, current market conditions and sustained order momentum leave us positively biased. And we continue to have many self help opportunities to positively influence our performance above and beyond underlying market growth. In addition, as highlighted by the increased to our intermediate financial objectives, we fiscal 27 with the strongest market position in Applied's history and with strategic initiatives that present a path to deliver meaningful earnings growth over the next 5 years. Overall, our track record highlights the power of our strategy and value creation potential, and we are extremely motivated and engaged based on what we believe lies ahead. With that, we will open up the lines for your questions. Operator: Thank you. We will now begin the Q&A session. You would like to ask a question, please pick up your handset press star followed by the number 1 on your telephone keypad. As a reminder, if at any time you need to reach an operator, please press star 0. We will pause for just a moment to compile the Q and A roster. Our first question comes from the line of Christopher Glynn with Oppenheimer and Co. Christopher, your line is open. Christopher Glynn: Yeah. Thanks. Good morning, everyone. It was just a kinda curiosity question for us to cap CapEx is almost 50% higher than the average the past several years. Just curious if anything's particularly you know, causing that or just keeping up with growth. David K. Wells: Yeah. We are coming off a year, you know, not a capital intensive business as you know, Christopher, but see some opportunities. That are in flight both in terms of some organic investment, you know, to further know, our footprint across some of automation business, for example, some technology, further technology investments, you know, no big heavy single hitters there, but just, you know, some organic investment continue to focus on both efficiencies and organic growth opportunities in the business. So stepping up as part of our capital deployment that CapEx a bit to see some of those opportunities that we see in front of us. Christopher Glynn: Brett. Mike sense. And, you know, so it is nice to see the environment. More enabling to show up the virility of the business model. And in that vein, you talked about some initiatives taking hold. Or curious, you know, in automation, are those key applications? I know they have plenty of runway, but you know, anything really standing out among the vision, digitization, robotics? And are there any new categories you wanna feature there that might roll into the fold near term And also in the initiatives bucket, you talked about increasing selling momentum. So maybe you know, go into that a bit. Neil A. Schrimsher: Sure. I can I can start, Christopher? So I think first across automation, they are active and continue to participate in technology. So you think about semi wafer fab equipment and data center, that is good. But, also, food and beverage, we are doing more with productized solutions that can help in robotics and autonomous mobile robots through facilities. As well as vision systems in and around consumer packaging and goods. And we are also helping with some solutions around strategic inventory management where Visual and Systems can play into there. So we think the setup and the industry outlooks around robotics and collaborative robots is strong. For years ahead. I think we are finding really good applications and developing those on the vision side. We will continue to look at what else is important in rounding out mean, we have got good digital solutions, user interface, We are helping customers as they think about AI, putting things in place in their facilities that help that. With robotics and vision and get returns for them in that front. We think we have a good mix. We will continue to evaluate on that front. And then, hey, just broader initiatives, I think, across the group on cross selling. I am I am still encouraged with the team's engagement on that. Good pipeline of opportunities. We are seeing increased number of customers looking to us as we know their operating facilities so well that we can help them, with advancements in fluid power systems, robotics, and vision, we are even seeing more opportunity around services and repair and pumps and valves with our flow control business. Brett. Christopher Glynn: And if I could sneak in a final 1. I understand the mid- high teens incremental margin long term framework. You did put up a 22% underlying in the quarter. You had a maybe 3 years of kind of flattish end market environments. You are clearly out of that right now. But you know, is there an opportunity where, you know, that could stay in the 20% range like you had underlying in the fourth quarter? Operator: Well, go ahead. David K. Wells: You have seen that potential, obviously, as you as you know The guidance does assume know, some slightly higher LIFO expense on a year over year basis. We finished, you know, 2026 at $21.5 million. Guidance assumes $24 million to $28 million. So I said the biggest wildcard you know, to your point, Christopher, would be LIFO expense and what that does in terms the p and l. If you strip that away, nice performance. We have shown the ability to things being equal, deliver 20-plus percent EBITDA incrementals. But that potential is there. I think that is the biggest wildcard in my mind because the team done a nice job as you saw in the most recent quarter of continuing to grow that underlying gross margin profile and control SD and A. Christopher Glynn: Brett. Thanks, guys. Operator: Okay. Our next question comes from the line of David Manthey with Baird. David, your line is open. A reminder to unmute yourself if you are muted locally. Thank you. If we go move to the next Moving to the next question. Our next question comes from the line of Kenneth Newman with KenBanc Capital Markets. Kenneth, your line is open. Ken Newman: Hey. Good morning, guys. Nice quarter. Neil A. Schrimsher: Hey, Ken. Maybe for my first question here, it was nice to see a pretty solid order growth of, I believe you said, 20% over year in your automation business this quarter. Neil, curious if you expect any kind of impact from this recent FCC ban on foreign robotics imports. I am assuming it is pretty low, but maybe can you remind us how much of the automation business is exposed to products impacted by the ban? And curious if that provides either a catalyst for pricing or share gains just relative to the new automation project integration. Ken Newman: Yeah. I would say to date, the assessment is it is pretty low into that front business to your point, continues to operate very well. Neil A. Schrimsher: Incoming orders are strong. Our work on applications in those targeted verticals as well as some cross selling opportunity remains good. So at this point, I think it is smaller. Ken Newman: Okay. that is that is helpful. I also was you know, geared towards your comment, Neil, on, you know, m and a potentially driving some stronger contributions to revenue growth this year. I know it is not included in your guidance, but maybe any color just on what you are seeing in the change in activity in the M&A pipeline I am curious if there is a way to kind of frame up what some of these targets could look like from a revenue or a margin perspective, if that is something you can talk to. Neil A. Schrimsher: Yeah. It would be harder to, you know, put it to specific revenues in that. Hey. We continue to be active And if you think about things like Hydrodyne and mid sized potential in naturally, across both segments of the business, there can be some smaller bolt ons, and then there are perhaps a few larger properties that I think we will either evaluate or look at coming to market. Over a period. Do those impact into 2027 or not, you know, really to be determined, but I think it is a good a good environment from an m and a standpoint. We continue to operate with clear priorities. And evaluate things that can be additive to our engineered solutions across fluid power, flow control, and automation. As well as augment our service center presence and performance into that. So a good activity in front. You know, we are a believer in helping ourselves. As we go through that so, we know what priorities matter. We know, good prospects, good targets. And so those dialogues, and exchanges continue. Ken Newman: Very helpful. Thanks. Operator: Our next question comes from the line of Andrew Oven with Bank of America. Andrew, your line is open. Andrew Obin: Yeah. Good morning. Can you hear me? Neil A. Schrimsher: Yes. Andrew Obin: Yeah. Just maybe a question. Can you just talk about the Dailik activity, average daily sales throughout the quarter? And what are you seeing in August Kind of trending across the quarter in terms of organic growth. David K. Wells: We had April at 10%, May pulled back just a bit to 8%, June finished up 10% again organically. So a 2-year stack at a very nice level as we closed out the quarter. Quarter to date, we have seen and talked about 6% to 8% expectation in terms of organic sales growth. Quarter date, we are trended about 7%. So, you know, right in line with expectations, Andrew. Andrew Obin: Yeah. And then Thank you. David K. Wells: And maybe yeah. Andrew Obin: Sorry. Neil A. Schrimsher: Yeah. I was just gonna add. If we think about July, you know, you know, we saw good continued positive order momentum in Julie, so that is encouraging. You know, the engineered solutions segment really up mid-20s into that. So automation continuing Sam some good order input on process flow control FCX, so that is encouraging. Right? We talked about a little bit in the remarks. Expecting more to come. From customers inside, and Fluid Power continuing at a good rate into the 20s as well. So, you know, backlog up year over year sequentially improved. When it is usually flat. From a seasonality standpoint and book to bill. Encouraging as well. So good intake from a July standpoint. Andrew Obin: And just maybe a follow-up on the same thing. As things continue to improve, how are you thinking about restocking? Maybe, you know, in fluid power, maybe valves and controls. how do you think about, you know, given the demand is coming up? Process or process automation. Fluid power, how do you think about, you know, potentially restocking into this growing demand? Neil A. Schrimsher: Yeah. So I think overall, we do a very good job. Obviously, we are connected, with the suppliers in that. Given our mobile OEM presence into that, and connectivity and also some in industrial and service and repair and then on the technology space. I think predominantly, we are in line, and we say often, we do not have, great stocking nor destocking in that as we relate to customers. Probably the differing point being on some of these mobile OEM side of it. So I think that strong kind of high single digit growth continued positive look at orders on that, can potentially turn into greater demand for us greater stocking levels than for our key suppliers as well. Andrew Obin: Thank you very much. Operator: Okay. Our next question comes from the line of Christopher Dankert with Loop Capital. Christopher, your line is open. Chris Stengert: Hey, morning, guys. I guess to kind of pull the thread on the ES order growth, I mean, up 20% or mid-20s pretty impressive. Normally, that books and turns fairly quickly. So maybe can you kind of help put that order growth in the context of the guide? I mean, what are we expecting for ES growth in the first quarter? I assume still double digits, but maybe just kind of put ES growth in context for the first quarter and the full year? Neil A. Schrimsher: Yes. I can start on the order side because I do not know that all of those you know, turn so quickly. Right? They can be related to projects even in flow control that can have a sequence in that. If we think about, the guide in the quarter, I would expect engineered solutions to perhaps be higher and then the service centers perhaps moderate a little bit as we work through. Obviously, it will play out into the quarter, but I think that, that informs the guide that we have for the first quarter in that. But those, engineered solutions orders some of those fit into other customer requirements or timing, which dictates that. And so are they a quarter out? Are they 2 quarters out? Or perhaps a little longer. Right? But we will see. Chris Stengert: Got it. that is incredibly helpful. Thank you. And I guess more of a high level question. Neil A. Schrimsher: I mean, I mean, you guys have been kind of working some of these internal cost optimization workflows for over a decade now. Lot of opportunity. I guess, Where are you focused today? And kind of how long is that runway Is it evergreen? Maybe just kind of update us on what we are we are actually on in terms of cost optimization internally. I think there is a, you know, evergreen opportunity around continuous improvement. And, hey, we got a good history of cost accountability. So as we look and think about use of technology in our business, I think that helps us in back office efficiencies. We are gonna have more resources forward facing and engaging with customers. I think a shared services opportunity is still in front of us. With opportunity especially across our engineered solutions businesses in that which can be Just plus other good ongoing, continuous improvement on the side. I am encouraged by some of the things that we are looking at that can take out slowing queues with the use of technology and AI. As we think about data, as we think about customer portals, And I think in time, some of those even further can support growth efficiencies as well. So continue to have a good history and a good pipeline of projects about how to continue to be cost effective. Because I think as we scale and grow, there is opportunity for us to do that with similar resources and perhaps more forward facing and engaging with customers in those market opportunities. Chris Stengert: And thanks so much. That certainly makes sense in the context of the medium term update. So, thanks so much, and best of luck into the new year, guys. Neil A. Schrimsher: Thank you. Thanks. Thanks, Christopher. Operator: Our next question comes from the line of David Manthey with Baird. David, your line is open. David Manthey: Thank you. Yeah, good morning, guys. So I do not want to split atoms here, but when I look at the declining segment, refining came out does not mean it is not still flat or negative. But and chemicals, remains the first industry that is named there. I am wondering if you could talk about trends you are seeing in industries and maybe the day to day maintenance business and the outlook for turnarounds over the next several months? Neil A. Schrimsher: Yeah. So if I think about chemicals, and you are right. We think about it in process flow control. You know, down low-single-digit into that stable to the last quarter, We touched on July orders, think about turnarounds and service work especially in chemicals and refining, have the potential to improve and contribute, as we go through the fiscal year including in the first half. But it has been, a bit of a headwind on those sides. But we think, that is service and that repair, those turnarounds are work that is gonna have to be done as some of that was deferred out from a year ago. David K. Wells: Yeah. David, I just would add. I think encouraging, both sales growth as well as order growth that we saw out of our flow control business the month of July, which again is a good indication that some of those process end markets, starting to recover here. Into early fiscal 27 following what had been a little bit of a softer backdrop that we saw throughout 2026. David Manthey: Yeah. that is good to hear. And then, David, on the guidance, $12 million to $13 million for interest expense seems a little high based on sort of where we are. Just wondered if you could walk through the rationale behind that level of guidance. David K. Wells: Yeah. A couple things that play into that, David. You know, there is the interest rate swap we had in place has rolled off, which gives us more flexibility in deploying capital to pay down further debt if we so desire. Part of it is the function of know, some of the assumptions around increased rates yet. And lower cash balances where we are, kind of offsetting and, you know, earning interest income and that is gives that interest expense as we continue to deploy capital for both M&A, share buyback and other capital allocation priorities. So really all 3 of those factors play into that scenario that drive up the interest expense on a year over year basis. That hedge rolled off really around Q3 of last year. So you are seeing only a half year where we had some of that benefit of the interest rate swap hedge. The 2026 results. Got it. David Manthey: Okay. Thank you. David K. Wells: You bet. Operator: At this time, we have no further questions. I will now turn the call over to Mr. Schrimsher for any closing remarks. Neil A. Schrimsher: I just want to thank everyone for taking the time to join us today, and we look forward to talking with you throughout the quarter. Thank you. Operator: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect. Before you buy stock in Applied Industrial Technologies, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Applied Industrial Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $432,621!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,335,314!* Now, it’s worth noting Stock Advisor’s total average return is 976% — a market-crushing outperformance compared to 214% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 20, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Applied Industrial Technologies. The Motley Fool has a disclosure policy. Applied Industrial (AIT) Q4 2026 Earnings Call Transcript was originally published by The Motley Fool

Find winning stocks in any market cycle. Join 7 million investors using Simply Wall St's investing ideas for FREE. Applied Industrial Technologies (NYSE: AIT) reported record fiscal 2026 results and updated its outlook on 15 August 2026. The company raised its fiscal 2027 guidance, pointing to higher expected financial targets than previously issued. Management outlined an active M&A program, backed by available balance sheet capacity and an identified acquisition pipeline. The M&A focus is aimed at scaling growth and reinforcing Applied Industrial Technologies' competitive position in its core markets. To put Applied Industrial Technologies in context, consider reviewing other under-the-radar industrial and distribution stocks with similar quality profiles through screener containing 18 high quality undiscovered gems. Applied Industrial Technologies is a US based trade distributor with a roughly $13.1b market cap that supplies motion, fluid power, flow control, and automation technologies across North America and select international markets. For investors, this mix of products and geographies helps frame the scale and scope behind its latest results and M&A plans. We've flagged 1 risk for Applied Industrial Technologies. See which could impact your investment. Applied Industrial Technologies reported fourth quarter sales of US$1,352.69 million and full year sales of US$4,966.69 million, with net income of US$414.53 million. Diluted EPS from continuing operations reached US$10.95 for the year. For readers, that gives a concrete baseline to compare the new fiscal 2027 targets and any future acquisition impact. The company expects fiscal 2027 EPS of US$11.65 to US$12.15 and total sales growth of 4.0% to 6.5%. Management has flagged geopolitical and inflation pressures and ongoing growth investment, and the guidance does not include any contribution from future acquisitions or buybacks. That helps you separate the underlying distribution and automation engines from any future deal activity. Applied Industrial Technologies plans to use nearly US$2b of balance sheet capacity for deals, with management pointing to an active pipeline across both segments and more than 18 acquisitions completed since 2018. The clearest near term marker is whether announced transactions start to show up in reported sales by the next few quarterly results through fiscal 2027, alongside progress toward the US$7b revenue and 14% EBITDA margin targets over the next five years. For the full picture including more risks and rewards, check out the complete Applied Industrial Technologies analysis. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include AIT. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

In August 2026, Applied Industrial Technologies reported record fourth-quarter and full-year results, with sales rising to US$1.35 billion for the quarter and US$4.97 billion for the year, alongside higher earnings per share versus the prior year. The company also issued fiscal 2027 guidance calling for earnings of US$11.65 to US$12.15 per share and 4.0% to 6.5% sales growth, while highlighting an active M&A pipeline supported by nearly US$2.00 billion of balance sheet capacity. We will now examine how this combination of record results, raised guidance, and a reinforced M&A focus shapes Applied Industrial Technologies’ investment narrative. Find 50 companies with promising cash flow potential yet trading below their fair value. To own Applied Industrial Technologies today, you need to be comfortable backing an industrial distributor that is pairing steady organic growth with a heavier emphasis on M&A. The latest quarter reinforced that story: record sales and earnings, guidance calling for mid single digit revenue growth and higher EPS in fiscal 2027, and nearly US$2.00 billion of balance sheet capacity earmarked for deals. In the near term, the main catalyst is whether management can convert that M&A pipeline into accretive transactions without diluting its high return on equity or quality of earnings. On the risk side, the share price already reflects a rich earnings multiple versus peers, while guidance explicitly bakes in macro and geopolitical uncertainty. This news strengthens the growth toolkit, but it also raises the execution bar. However, investors should be aware of how much of this optimism already seems priced in. Applied Industrial Technologies' shares are on the way up, but they could be overextended by 24%. Uncover the fair value now. Three fair value views from the Simply Wall St Community span roughly US$238.54 to US$400, underscoring how far apart individual estimates can be. Set against management’s deal driven ambitions and macro sensitive guidance, these differing views highlight why checking several perspectives on AIT’s prospects matters. Explore 3 other fair value estimates on Applied Industrial Technologies - why the stock might be worth 34% less than the current price! Disagree with this assessment? Extraordinary investment returns rarely come from following the herd, so go with your instincts. A great starting point for your Applied Industrial Technologies research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision. Our free Applied Industrial Technologies research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Applied Industrial Technologies' overall financial health at a glance. Opportunities like this don't last. These are today's most promising picks. Check them out now: Rare earth metals are the new gold rush. Find out which 28 stocks are leading the charge. Invest in the nuclear renaissance through our list of 91 elite nuclear energy infrastructure plays powering the global AI revolution. AI is about to change healthcare. These 44 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10b in market cap - there's still time to get in early. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include AIT. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Applied Industrial Technologies, Inc. AIT reported fourth-quarter fiscal 2026 (ended June 30, 2026) earnings of $3.17 per share, which surpassed the Zacks Consensus Estimate of $2.92. The bottom line increased 13.2% year over year.Net sales of $1.35 billion beat the consensus estimate of $1.29 billion. Also, the top line increased 10.4% year over year. Acquisitions boosted the top line by 0.3% while foreign-currency translation had a favorable impact of 0.4%. Organic sales increased 9.7% year over year.In fiscal 2026, the company reported earnings of $10.95 per share, up 8.2% year over year. AIT’s net sales were $4.97 billion in the year, up 8.8% year over year. Service Center segment sales increased 9% year over year to $849.5 million. Organic sales rose 7.9%, acquisitions contributed 0.5% and foreign currency added 0.6%. U.S. organic sales increased 9%, supported by stronger technical maintenance, repair and operations demand and internal sales initiatives.Segment EBITDA increased 16.3% to $123.6 million. The EBITDA margin expanded 91 basis points to 14.5%, reflecting operating leverage from stronger sales, steady margin performance and effective cost management. Engineered Solutions segment’s sales jumped 12.9% to $503.2 million, entirely on an organic basis. Growth was driven by stronger demand and backlog conversion across automation and fluid power, with contributions from industrial and mobile OEM customers and technology verticals.Segment EBITDA rose 15.8% to $76.2 million, while the EBITDA margin improved 38 basis points to 15.1%. Operating leverage and cost management supported profitability, although muted Flow Control sales growth partly offset the gains. Applied Industrial Technologies, Inc. price-consensus-eps-surprise-chart | Applied Industrial Technologies, Inc. Quote In the quarter, Applied Industrial’s cost of sales was up 10.8% year over year to $941.5 million. Gross profit was $411.2 million, up 9.7% from the year-ago quarter.Gross margin slipped 20 basis points to 30.4%, including a 26-basis-point year-over-year headwind from higher LIFO expense. Selling, distribution and administrative expenses (including depreciation) increased 5.1% year over year to $251.9 million. EBITDA was $177.6 million, reflecting an increase of 16.1%. The EBITDA margin expanded 64 basis points to 13.1%. Exiting fiscal 2026, Applied Industrial had cash and cash equivalents of $127.1 million compared with $388.4 million at the end of fiscal 2025. Long-term debt was $262.3 million compared with $572.3 million at the end of the prior fiscal year.In fiscal 2026, it generated net cash of $484.1 million from operating activities, indicating a decrease of 1.7% from the prior year. Capital expenditures totaled $23.6 million, down 13.3% year over year. Free cash flow decreased 1% year over year to $460.5 million.In fiscal 2026, AIT rewarded its shareholders with dividends of $72.6 million, up 14% year over year. For fiscal 2027 (ending June 2027), Applied Industrial projects sales growth of 4-6.5%, an EBITDA margin of 12.5-12.8% and earnings of $11.65-$12.15 per share. The midpoint assumes stronger sales growth in the first half than the second half, with approximately 150-200 basis points of price contribution.For the first quarter of fiscal 2027 (ending September 2026), AIT expects total sales growth of 6.5-8.5%, organic growth of 6-8% and an EBITDA margin of 12.3-12.4%. The company also raised its intermediate targets to $7 billion in sales and a 14% EBITDA margin, which it expects to achieve over five years. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Carlisle Companies Incorporated CSL reported second-quarter 2026 adjusted earnings of $7.03 per share, which beat the Zacks Consensus Estimate of $6.43 by 9.3%. The bottom line increased 12% year over year. Revenues rose 8% year over year to a record $1.57 billion and surpassed the consensus estimate of $1.47 billion. 3M Company MMM reported second-quarter 2026 adjusted earnings of $2.40 per share, which surpassed the Zacks Consensus Estimate of $2.27 by 5.7%. The bottom line increased 11% year over year.MMM’s adjusted net revenues of $6.5 billion topped the consensus estimate of $6.4 billion and grew 5.5%. On an adjusted basis, organic revenues increased 5.4% year over year. Graco Inc. GGG reported second-quarter 2026 adjusted earnings of 91 cents per share, up 17% from 78 cents in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate of 81 cents by 12.4%.The company’s net sales rose 3% year over year to $590.6 million but lagged the consensus estimate of $609 million by 3%. Organic order backlog (excluding acquisitions) rose 28% from the end of 2025. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report 3M Company (MMM) : Free Stock Analysis Report Graco Inc. (GGG) : Free Stock Analysis Report Carlisle Companies Incorporated (CSL) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Applied Industrial Technologies, Inc.? Here are five stocks we like better. Record fourth-quarter performance: Applied Industrial Technologies reported 10.4% sales growth, 9.7% organic growth, a 16.1% increase in EBITDA and 13.2% EPS growth to $3.17. Free cash flow reached $159.7 million, while operating leverage helped expand EBITDA margins despite higher LIFO costs. Engineered Solutions led segment growth: Organic sales increased 12.9%, supported by more than 20% growth in automation and stronger demand for robotics, machine vision, digital technologies and technology-related applications. Service Center sales also rose 7.9%, with EBITDA up 16.3%. Fiscal 2027 outlook remains positive: Management expects sales growth of 4% to 6.5%, EPS of $11.65 to $12.15 and EBITDA margins of 12.5% to 12.8%, while citing potential upside from flow-control recovery and acquisitions. The company also raised its five-year targets to $7 billion in sales and a 14% EBITDA margin. Should You Invest in the Industrial Sector in 2022? 3 Industrial Stocks to Consider Applied Industrial Technologies (NYSE:AIT) reported record fourth-quarter sales and earnings that exceeded its expectations, supported by improving industrial demand, stronger volumes and operating leverage. The company said organic sales rose 9.7% year over year, its strongest growth rate in more than three years, while reported sales increased 10.4%. President and Chief Executive Officer Neil Schrimsher said demand strengthened through the end of the quarter, with organic sales up more than 10% in June despite tougher comparisons. He attributed the increase primarily to greater technical maintenance, repair and operations activity, capital spending, internal sales initiatives and the company’s market position. → AST SpaceMobile Earnings Just Reminded Investors How Risky Space Can Be “The quarter was underscored by organic sales growth of 10%, which was the strongest in more than three years,” Schrimsher said. He added that 20 of the company’s top 30 end markets posted year-over-year sales growth, compared with 17 in the prior quarter. Growth was strongest in metals, technology, utilities and energy, machinery, rubber and plastics, and pulp and paper. Chemicals, lumber and wood, and transportation remained areas of decline. → Nebius’ Q2 Beat Shows the AI Bottleneck Is Capacity, Not Demand Reported EBITDA increased 16.1% from the prior-year quarter, and EBITDA margin expanded 64 basis points to 13.1%. Earnings per share rose 13.2% to $3.17 from $2.80 a year earlier. Chief Financial Officer David Wells said the results included higher LIFO inventory-accounting expense. Fourth-quarter LIFO expense was $6.4 million, compared with $2.9 million a year earlier, creating a 26-basis-point year-over-year headwind to both gross margin and EBITDA margin. Excluding LIFO expense, gross margin increased modestly, according to Wells. → On Holding's Price Stumble May Be an Opening for a Company Built to Run Gross margin was 30.4%, down 20 basis points year over year, while selling, distribution and administrative expense improved by 94 basis points as a percentage of sales to 18.6%. Wells said disciplined spending, technology investments, shared-services initiatives and sales productivity tools helped offset inflation, higher incentive costs and growth investments. Fourth-quarter free cash flow totaled $159.7 million, up nearly 16% year over year and representing roughly 135% conversion relative to net income. For fiscal 2026, free cash flow was $461 million, down modestly from the prior year as the company increased working-capital investment to support growth. Net working capital as a percentage of sales ended the year at a six-year low, Schrimsher said. The Engineered Solutions segment led growth, with organic sales rising 12.9%. Automation sales increased more than 20%, marking the business’s strongest organic growth in more than four years, as demand increased for robotics, machine vision and digital technologies. The segment also posted high-single-digit growth in industrial and mobile fluid power operations. Schrimsher said technology-related business, including semiconductor and data-center activity, contributed to segment performance. The technology vertical represents more than 15% of Engineered Solutions sales and includes automation, fluid power and flow-control offerings. Engineered Solutions EBITDA increased 15.8%, while segment EBITDA margin expanded 38 basis points to 15.1%, despite a 44-basis-point LIFO headwind. Flow-control sales were comparatively muted due to a difficult prior-year comparison and softer maintenance activity in process markets. The Service Center segment delivered 7.9% organic sales growth and 16.3% EBITDA growth. Segment EBITDA margin increased 91 basis points to 14.5%. The company cited stronger U.S. service-center volumes, growth among national strategic accounts and high-single-digit growth from small and midsize local accounts. Twenty-seven of the company’s top 30 industry verticals in its U.S. service-center network grew year over year during the quarter. Management said Hydradyne, acquired 18 months earlier, continued to contribute to fluid-power performance. Hydradyne sales increased by a double-digit percentage in the second half of fiscal 2026, while its EBITDA margin improved by more than 200 basis points. Applied issued fiscal 2027 guidance for earnings per share of $11.65 to $12.15, sales growth of 4% to 6.5%, and EBITDA margins of 12.5% to 12.8%. The outlook assumes pricing will contribute 150 to 200 basis points to sales growth and excludes contributions from future acquisitions and share repurchases. For the fiscal first quarter, the company projected organic sales growth of 6% to 8% and EBITDA margin of 12.3% to 12.4%. Organic sales were tracking at roughly 7% through mid-August, Wells said. Management expects stronger growth in the first half of the fiscal year and more modest growth in the second half, reflecting tougher comparisons and uncertainty surrounding geopolitical developments and trade policy. Schrimsher said the company expects potential improvement in higher-margin flow-control sales as deferred maintenance, project work and turnarounds in chemicals and refining resume. July orders in flow control were encouraging, management said, while Engineered Solutions orders were up in the mid-20% range during the month. The company expects fiscal 2027 free cash flow to remain strong but potentially decline year over year because of additional working-capital investment and capital expenditures of $35 million to $40 million. Applied ended June with $127 million in cash, net leverage of 0.2 times EBITDA and nearly $2 billion of stated balance-sheet capacity, including revolving-credit availability and an accordion option. Applied deployed about $425 million during fiscal 2026 on buybacks, dividends, capital expenditures and acquisitions. It repurchased 1.2 million shares for $317 million during the year, including more than 265,000 shares for $81 million in the fourth quarter, and raised its quarterly dividend by 11%. Management also raised its intermediate financial objectives, targeting $7 billion in sales, up from its prior $5.5 billion target, and a 14% EBITDA margin, up from 13%. Schrimsher said the company believes the targets can be achieved over the next five years, depending on macroeconomic conditions, merger-and-acquisition activity and other factors. Mergers and acquisitions remain a priority, with management evaluating opportunities across both segments. While no acquisition contribution is included in fiscal 2027 guidance, Schrimsher said the company sees a productive environment for potential bolt-on and larger transactions in automation, fluid power, flow control and service-center operations. Applied Industrial Technologies, listed on the New York Stock Exchange under the symbol AIT, is a leading distributor of industrial products and services. The company offers a comprehensive range of bearings, power transmission components, fluid power products, industrial rubber products, and automation solutions. Through its network of distribution centers and branch locations, Applied Industrial Technologies serves diverse end markets including manufacturing, oil and gas, mining, food and beverage, and wastewater treatment. Founded in 1923 and headquartered in Cleveland, Ohio, Applied Industrial Technologies has grown through a combination of organic expansion and strategic acquisitions. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Applied Industrial Technologies Q4 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

This article first appeared on GuruFocus. Revenue: Consolidated sales increased 10.4% year-over-year, with organic sales growth of 9.7%. Organic Sales Growth: 10% in the fourth quarter, the strongest in more than three years. Gross Margin: 30.4%, down 20 basis points year-over-year, impacted by LIFO expense. EBITDA: Increased 16.1% year-over-year, with EBITDA margin expanding 64 basis points to 13.1%. Earnings Per Share (EPS): $3.17, up 13.2% from $2.80 in the prior year quarter. Free Cash Flow: $159.7 million in the fourth quarter, up nearly 16% year-over-year; $461 million for fiscal 2026. Service Center Segment Sales: Increased 7.9% organically year-over-year. Service Center Segment EBITDA Margin: 14.5%, expanding 91 basis points. Engineered Solutions Segment Sales: Increased 12.9% organically year-over-year. Engineered Solutions Segment EBITDA Margin: 15.1%, expanding 38 basis points. Automation Sales: Organic sales increased over 20% year-over-year. Fluid Power Sales: Increased by a high single-digit percent year-over-year. Pricing Contribution: Approximately 250 basis points to year-over-year sales growth in the quarter. Volume Growth: Approximately 7% year-over-year. SG&A Expense: Increased 5.1% year-over-year; as a percentage of sales, improved 94 basis points to 18.6%. Share Buybacks: Repurchased over 265,000 shares for $81 million in the fourth quarter; 1.2 million shares for $317 million in fiscal 2026. Fiscal 2027 Guidance: EPS in the range of $11.65 to $12.15, sales growth of 4% to 6.5%, and EBITDA margins of 12.5% to 12.8%. Warning! GuruFocus has detected 7 Warning Signs with LPA. Is AIT fairly valued? Test your thesis with our free DCF calculator. Release Date: August 13, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. 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. Q: Can you provide more color on the strong order growth in the Engineered Solutions segment, particularly in automation, and how this translates into the fiscal 2027 guidance?A: Neil Schrimsher (CEO) noted that order growth in Engineered Solutions was up over 20% year-over-year for the third straight quarter, with automation orders up mid-20s in July. While some of these orders turn quickly, others are tied to projects, particularly in flow control, which can have longer lead times. The company expects Engineered Solutions to potentially grow faster than the Service Center segment in the first quarter, informing the overall 6% to 8% organic sales growth guidance for Q1. Q: What is the outlook for the process industries, specifically chemicals and refining, and how are turnaround and maintenance activities trending?A: Neil Schrimsher (CEO) stated that chemicals sales were down low single digits, stable versus the last quarter. However, the company sees potential for improvement in turnarounds and service work in chemicals and refining as the fiscal year progresses, including in the first half. Ryan Cieslak (VP of IR) added that July showed encouraging sales and order growth in the flow control business, indicating a potential recovery in process end markets after a softer backdrop in fiscal 2026. Q: What is driving the higher CapEx guidance for fiscal 2027, and can you elaborate on the potential for sustaining 20%+ incremental EBITDA margins?A: David Wells (CFO) explained that the increased CapEx (to $35-$40 million) is for organic investments in automation footprint and technology, not any single large project. Regarding margins, he noted the company has demonstrated the ability to deliver 20%+ EBITDA incrementals, but the biggest wildcard is LIFO expense. Guidance assumes higher LIFO expense ($24-$28 million vs. $21.5 million in fiscal 2026), which could impact the P&L, but excluding that, the underlying margin performance remains strong. Q: How are average daily sales trending through the quarter and into August, and what is the current demand environment?A: David Wells (CFO) detailed that organic growth was 10% in April, 8% in May, and 10% in June. Quarter-to-date in August, trends are at about 7%, in line with the 6% to 8% expectation for Q1. Neil Schrimsher (CEO) added that July saw continued positive order momentum, with Engineered Solutions orders up mid-20s, and backlog up year-over-year with an encouraging book-to-bill ratio. Q: What is the company's view on the potential impact of the FCC ban on foreign robotics imports, and does it present an opportunity?A: Neil Schrimsher (CEO) stated that the assessment to date is that the impact is pretty low. The automation business continues to operate very well with strong incoming orders and good application work in targeted verticals. At this point, the impact is considered smaller, but the company remains focused on its growth initiatives. Q: Can you provide more detail on the M&A pipeline and the potential for M&A to contribute more meaningfully to growth in fiscal 2027?A: Neil Schrimsher (CEO) indicated that the M&A environment is increasingly productive, with targets facing heightened competition and extended ownership life cycles. The company is actively evaluating targets across both segments, with priorities in Engineered Solutions (fluid power, flow control, automation) and augmenting the Service Center presence. While M&A is not included in guidance, the company believes contribution could be more meaningful in fiscal 2027 and beyond. Q: What are the key drivers behind the increased intermediate financial targets of $7 billion in sales and 14% EBITDA margin?A: Neil Schrimsher (CEO) highlighted the company's strong historical performance, with five-year compounded annual growth of 9% in sales, 14% in EBITDA, and 18% in EPS. The updated targets reflect the ongoing evolution of the business, positioning Applied at the intersection of powerful growth trends like automation adoption, physical AI integration, and critical infrastructure build-out. The company believes these objectives are achievable over the next five years, supported by structural mix tailwinds and ongoing M&A. Q: How is the company thinking about restocking opportunities in fluid power and flow control given the improving demand environment?A: Neil Schrimsher (CEO) explained that the company does not typically see significant stocking or destocking in its business, except potentially on the mobile OEM side. The strong high single-digit growth and continued positive order trends could potentially lead to greater demand and higher stocking levels for key suppliers, which would be a positive tailwind for the company. Q: What are the key assumptions behind the fiscal 2027 guidance, particularly regarding LIFO expense and interest expense?A: David Wells (CFO) noted that guidance assumes higher LIFO expense in fiscal 2027 ($24-$28 million vs. $21.5 million in fiscal 2026), though the year-over-year increase is expected to be more modest. Interest expense guidance of $12-$13 million reflects the roll-off of an interest rate swap, assumptions around increased rates, lower cash balances, and continued capital deployment for M&A and share buybacks. Q: Can you elaborate on the cost optimization initiatives and the runway for continued efficiency improvements?A: Neil Schrimsher (CEO) stated that there is an evergreen opportunity around continuous improvement. The company is focused on using technology for back-office efficiencies, expanding shared services across Engineered Solutions, and leveraging AI for data and customer portals. These initiatives are expected to support growth efficiencies and allow more resources to be forward-facing with customers as the company scales. For the complete transcript of the earnings call, please refer to the full earnings call transcript.