Applied Industrial Technologies (NYSE: AIT) reported Q4 EPS of $0.80, $0.12 better than the analyst estimate of $0.68. Revenue for the quarter came in at $725.1 million versus the consensus estimate of $739.39 million.

Fiscal Fourth Quarter 2020 Highlights

• Net Sales of $725.1 Million Down 17.9% YoY; Down 18.4% on an Organic Basis
• EPS of $0.77;Non-GAAP Adjusted EPS of $0.80
• Operating Cash Flow of $127.1 Million; Free Cash Flow of $123.2 Million

Neil A. Schrimsher, Applied’s President & Chief Executive Officer, commented “I want to thank our associates for their strong effort and support throughout fiscal 2020 including the exceptional response in recent months to the ongoing COVID-19 pandemic. We have adapted well with all of our locations fully operational and playing a vital role in keeping essential industries productive, while understanding our requirements during this slower demand environment. This resiliency was apparent during the quarter with decremental margins on adjusted operating income in the mid-teens despite a high-teen sales decline, as well as strong cash generation further enhancing our balance sheet and flexibility as we enter fiscal 2021.”

Mr. Schrimsher added, “As expected, demand was challenging throughout the quarter as customers in many of our core manufacturing end markets idled or reduced production capacity and facility utilization in response to the pandemic. Underlying trends remain subdued but are firming slightly into our fiscal 2021 first quarter with organic sales down mid-teens year-over-year through early August. While we believe the worst is behind us, visibility is limited and we expect a slow pace near term as customers gradually bring facilities back online and conservatively manage operations against a still fluid pandemic and macro outlook.”

“Going forward, we will remain prudent and have reinforced recent cost actions, though with an offensive approach in mind as we position for the recovery and execute strategic initiatives aimed at optimizing our growth in coming years. We remain committed to our long-term financial targets of $4.5 billion in sales and 11% EBITDA margins. While the timing of these goals is dependent on the industrial cycle trajectory, I believe Applied’s long-term growth and margin potential have never been stronger as our leading technical MRO position, service capabilities, and strategic direction further entrench our value across critical motion, power, and control infrastructure, as well as next generation industrial solutions.”

Fiscal 2021 Outlook

Due to ongoing uncertainty from the COVID-19 pandemic, the Company is refraining from providing formal financial guidance for the full-year fiscal 2021 until it further assesses the direction of industrial activity. Near term, assuming underlying demand remains stable with July and early August levels, first quarter sales are expected to decline 17% to 18% year-over-year on an organic basis. In addition, the Company has extended previously announced cost measures into early fiscal 2021. The majority of these actions remain temporary and will be reevaluated as the year progresses alongside growth requirements.

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