Applied Industrial Technologies (NYSE: AIT) reported Q2 EPS of $0.97, $0.01 better than the analyst estimate of $0.96. Revenue for the quarter came in at $833.4 million versus the consensus estimate of $836.57 million.

• Net Sales of $833.4 Million Down 0.8% YoY; Down 4.0% on an Organic Basis
• Net Income of $38.0 Million; EPS of $0.97
• Cash from Operations of $54.9 Million; Free Cash of $47.9 Million
• Quarterly Dividend Increased to $0.32 Per Share
• Fiscal 2020 Guidance Updated, Range Narrowed

Commenting on the results, Applied’s President & Chief Executive Officer Neil A. Schrimsher said, “We are executing on our earnings commitments midway through fiscal 2020 despite tepid demand industry-wide, and are on track to achieve record free cash flow. In the current slow environment, we remain focused on expense control, leveraging our technical and cross-selling capabilities, and pursuing M&A that enhances our earnings and return potential long term.”

“As we enter the second half of our fiscal year, we expect ongoing benefits from these internal initiatives. That said, end-market demand remains challenging and uncertain, with our recent quarter impacted by an unusually slow December. While likely impacted by typical seasonal variability this time of year, we expect subdued industry demand to persist near-term as customers slowly rebound from an evolving trade and industrial production backdrop. Our track record of cost control and cash generation is once again apparent and key in this type of environment, while our leading technical position across motion control, fluid power, flow control, and automation provides significant and differentiated long-term growth potential.”

GUIDANCE:

Applied Industrial Technologies sees FY2020 EPS of $4.20-$4.40, versus the consensus of $4.34.

The Company is updating fiscal 2020 guidance following performance year to date and ongoing end-market uncertainty. Guidance now assumes non-GAAP adjusted EPS of $4.20 to $4.40 on a change in sales of down 2% to 0%, including down 5% to down 3% on an organic daily basis. Prior guidance assumed non-GAAP adjusted EPS of $4.20 to $4.50, and sales down 2% to up 2% including down 5% to down 1% on an organic daily basis. The adjusted EPS ranges exclude fiscal first quarter restructuring expenses. In addition, we reaffirm our free cash guidance of $200 million to $220 million, up 30% at the midpoint.

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