Automation is an undeniable trend in the broad industrial end-markets that Applied Industrial Technologies (NYSE:AIT) serves, and management is positioning itself accordingly – acquiring capabilities in design, assembly, and integration to leverage growth opportunities as more and more industries/companies incorporate automation into their manufacturing and warehouse processes.
AIT isn’t just an automation story, it’s also a value-added industrial distribution story where management has wisely steered clear of fast-turn, low-value MRO components and has instead focused on higher-value critical components and service. This has led to something extremely rare in the industrial distribution space over the past decade – actual gross margin improvement.
AIT has historically had some of the strongest cyclical volatility in the space, and I am worried that as with other supposedly “short cycle” names like Parker Hannifin (NYSE:PH) (an OEM, not a distributor), the Street thinks the story is over now that manufacturing PMI is well above 55. I wouldn’t ignore that cyclical risk, but I think automation is a leverageable long-term trend for AIT, and the long-term prospective return is looking pretty interesting.
Read the full article here:
Automation And Catch-Up Capex Make Applied Industrial Technologies A Name To Watch
No comments:
Post a Comment