Five Catalysts Behind Applied Industrial Technologies (AIT)

| About: Applied Industrial (AIT)

Applied Industrial Technologies (NYSE:AIT) distributes industrial products in North America. Its products include bearings, power transmission components, fluid power components and systems. The company’s fluid power products include hydraulic, pneumatic, lubrication, and filtration components and systems. (Yahoo Finance)

Here are five catalysts that make AIT a buy:

1) AIT met or exceeded analysts’ earnings expectations in 15 of the past 16 quarters. The company raised its third-quarter and fiscal year 2006 earnings per share guidance.

2) Earnings per share grew 23.6% over the past five years and are forecasted to grow 12.0% over the next 3-5 years. AIT posted second-quarter fiscal 2006 earnings per share of 50 cents, 6.4% higher than the Street’s estimate and a 51.5% increase over the prior year. Revenues jumped 12.9% to $456.2 million. The company said higher sales and cost controls fueled its impressive second quarter.

3) Over the past 90 days, analysts have increased consensus estimates for this quarter and next (up 7.6% and 3.5% respectively). Forecasts for fiscal 2006 and fiscal 2007 profits jumped 5.3% and 14.8% respectively over the same time period.

4) AIT’s management has done a good job of enhancing profitability. The company’s return on equity is 16%, compared to 12% ROE average for the industry. On Jan 18, 2006, the Board of Directors declared a quarterly cash dividend of 15 cents per common share. The company is currently yielding 1.4% and has a five-year average dividend yield of 2.2%. The board approved the purchase of up to one million shares of the company's common stock.

5) Last but not the least, the stock has momentum: In the past 30 trading days, AIT's shares have increased 18%, compared to a 0.14% rise in the S&P 500. Average trading volume for the past five days was 145,025 shares, compared with the 40-day moving average of 151,368 shares, proving the stock has good momentum to move even higher in the near term.

Disclosure: I do not own the stock

AIT 1-yr chart:

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