Applied Industrial Technologies (AIT) Q4 2026 earnings summary

Executive summary

• Achieved record Q4 sales and earnings, with organic sales growth of 10%, the strongest in over three years, and notable improvement from 6% last quarter.

• EBITDA grew 16% and EPS rose 13% year-over-year, despite ongoing LIFO expense headwinds.

• Both Engineered Solutions and Service Center segments saw improved demand and positive sales momentum, with 20 of top 30 end markets generating positive growth.

• Automation sales led growth, up over 20% year-over-year, with strong performance in fluid power and technology verticals.

• Raised intermediate financial targets: sales objective increased to $7B (from $5.5B) and EBITDA margin target to 14% (from 13%) over the next five years.

Financial highlights

• Consolidated Q4 sales increased 10.4% year-over-year; organic sales up 9.7%.

• Q4 EBITDA was $177.6M, up 16.1% year-over-year; EBITDA margin at 13.1%, up 64 bps.

• Q4 EPS was $3.17, up 13.2% year-over-year; net income reached $118.6M.

• Free cash flow for Q4 was $159.7M, up 16% year-over-year; full-year free cash flow was $460.5M.

• Gross margin was 30.4%, down 20 bps due to higher LIFO expense; excluding LIFO, gross margin was up modestly.

Outlook and guidance

• Fiscal 2027 guidance: EPS of $11.65–$12.15, sales growth of 4%–6.5%, EBITDA margin of 12.5%–12.8%.

• Q1 2027 organic sales expected to increase 6%–8% year-over-year; Q1 EBITDA margin guidance of 12.3%–12.4%.

• Guidance assumes 150–200 basis points of sales growth from pricing, ongoing inflationary pressures, and higher LIFO expense.

• Intermediate targets raised to $7B sales and 14% EBITDA margin over five years.

• Guidance reflects macro uncertainty, inflationary headwinds, and does not include future M&A or share buybacks.