Conditions are still challenging for industrial MRO and component distributors like Applied Industrial Technologies (NYSE:AIT). While construction-related markets are pretty healthy, manufacturing is still in rough shape and most MRO distributors like Grainger (NYSE:GWW), Fastenal (NASDAQ:FAST), MSC Industrial (NYSE:MSM), and Kaman (NASDAQ:KAMN) are still looking at pretty uninspiring near-term growth prospects.
And yet, there are some reasons to be encouraged. Only about a third of Applied Industrial's markets have been contributing growth, but the last quarter was a little stronger and it looks as though markets like oil/gas and metals are stabilizing and the recent improvement in the metalworking index could be an encouraging sign for manufacturing. The surge in this sector has taken Applied Industrial's stock out of clear value territory, with the shares up 20% since the election and about 40% since just before the last quarter's earnings, but the shares do seem priced for a roughly double-digit total return and the quality of this business makes it a name to consider as a play on a future industrial recovery if and when the sector pulls back.
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Green Shoots May Be On The Way For Applied Industrial Technologies