Applied Industrial Benefits from MRO Demand and Acquisitions but Faces Rising Costs

Earnings

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Summary · why it matters

Applied Industrial Technologies continues to benefit from strong demand for technical MRO services and recent acquisitions, though rising expenses and supply-chain constraints remain concerns. In the fiscal third quarter ended March 31, 2026, organic sales in the Service Center Based Distribution segment rose 4.2% year over year, while the Engineered Solutions segment saw a 9.3% organic sales increase. The company announced the bolt-on acquisition of Thompson Industrial Supply in January 2026, expected to generate approximately $20 million of annual sales in its first year, and acquired IRIS Factory Automation in May 2025 to boost automation offerings. Capital deployment included $53.7 million in dividends paid during the first nine months of fiscal 2026, up 15.2% year over year, and a quarterly dividend increase of 11% to 51 cents per share in January 2026, along with $236.4 million in share repurchases and a new buyback program authorized in April 2026 for up to 3 million shares. However, cost of sales rose 8.1% and SG&A expenses increased 9.4% in the first nine months, while LIFO expense jumped to $15.1 million from $4.8 million a year earlier, with further increases expected in the fiscal fourth quarter.

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