Applied Industrial Technologies (AIT) Q2 2026 earnings summary

Executive summary

• Net sales for Q2 2026 increased 8.4% year-over-year to $1.16 billion–$1.2 billion, with organic growth of 2.2% and strong acquisition contributions, notably Hydradyne and Thompson Industrial Supply.

• Net income was $95.3 million ($2.51 per diluted share), up 4.6%–5.0% year-over-year, with EBITDA rising 3.9% to $140.4 million.

• Order momentum remained positive, with mid-single-digit organic sales growth in January and early Q3.

• Capital deployment included the acquisition of Thompson Industrial Supply, an 11% dividend increase, and $143 million in share repurchases year-to-date.

• Focus on organic growth, M&A, dividend growth, and share buybacks, supported by a strong balance sheet.

Financial highlights

• Sales rose 8.4% year-over-year to $1.16 billion, with organic growth of 2.2% and acquisitions contributing 6%.

• Gross margin was 30.4%, down 19 basis points year-over-year due to $6.9 million LIFO expense.

• EBITDA margin was 12.1%, down 52 basis points year-over-year due to LIFO headwind.

• EPS was $2.51, up 4.6%–5.0% from the prior year, aided by a lower tax rate and reduced share count.

• Free cash flow for the quarter was $93.4 million, with conversion near 98% of net income.

Outlook and guidance

• Fiscal 2026 EPS guidance raised to $10.45–$10.75, with sales growth of 5.5%–7.0% and organic growth of 2.5%–4.0%.

• EBITDA margin guidance set at 12.2%–12.4%.

• Annual LIFO expense now expected at $24–$26 million, up from prior guidance.

• Guidance assumes ongoing macro and policy uncertainty, with sequential gross margin decline expected in Q3.

• Effective tax rate for fiscal 2026 expected at 23.0%–24.0%.