Applied Industrial’s first quarter results met Wall Street’s revenue expectations but drew a negative market reaction, with shares falling sharply after the announcement. Management attributed the soft performance to ongoing weakness in key industrial markets, particularly in its Engineered Solutions segment, which continued to face slowdowns in OEM fluid power demand and delayed project activity. CEO Neil Schrimsher described the environment as “muted and evolving,” noting that operational discipline and continued focus on gross margin initiatives helped offset sluggish organic growth. The company also highlighted improving order activity in some end markets, but acknowledged that demand trends remain volatile and difficult to predict.
Is now the time to buy AIT? Find out in our full research report (it’s free).
Applied Industrial (AIT) Q1 CY2025 Highlights:
- Revenue: $1.17 billion vs analyst estimates of $1.17 billion (1.8% year-on-year growth, in line)
- EPS (GAAP): $2.57 vs analyst estimates of $2.41 (6.5% beat)
- Adjusted EBITDA: $144.9 million vs analyst estimates of $142 million (12.4% margin, 2.1% beat)
- EPS (GAAP) guidance for the full year is $9.93 at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 11.1%, in line with the same quarter last year
- Market Capitalization: $8.55 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Applied Industrial’s Q1 Earnings Call
- Christopher Glynn (Oppenheimer) asked about customer exposure to China sourcing and potential production slowdowns. CEO Neil Schrimsher explained that direct exposure is limited and noted resilience in technology, food and beverage, and construction-related markets.
- David Manthey (Baird) inquired about the company’s approach to pricing guidance amid tariff-driven supplier cost increases. Schrimsher said pricing inputs are being layered into forecasts, with the company monitoring both direct inflation and potential demand destruction.
- Sabrina Abrams (Bank of America) questioned the rationale for cautious Q4 guidance despite improving order trends. Schrimsher said the outlook is intentionally prudent due to ongoing uncertainty, and CFO Dave Wells cited tougher year-over-year comparisons and possible margin headwinds.
- Ken Newman (KeyBanc Capital Markets) asked about operating leverage and incremental margins if demand normalizes. Schrimsher and Wells reiterated confidence in mid- to high-teen incremental margins, highlighting past performance and anticipated mix benefits from Engineered Solutions.
- Unidentified Analyst (Mizuho) requested insight into reshoring investments and customer willingness to accept price increases. Schrimsher described ongoing reshoring activity and said customers and suppliers are generally prepared to adjust to new pricing and contract terms as needed.
Catalysts in Upcoming Quarters
In the coming quarters, StockStory’s analysts will be tracking (1) integration progress and synergy realization from the Hydradyne and IRIS Factory Automation acquisitions, (2) the pace of recovery in Engineered Solutions orders—especially within automation and fluid power, and (3) the company’s ability to sustain gross margin gains despite persistent cost and demand headwinds. Updates on tariff impacts and customer spending trends will also be critical signposts.
Applied Industrial currently trades at $225.20, down from $242.76 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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